Why You Might Be Interested In ORBIS AG (ETR:OBS) For Its Upcoming Dividend

It looks like ORBIS AG (ETR:OBS) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, ORBIS investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 2nd of June.

The company's next dividend payment will be €0.10 per share, and in the last 12 months, the company paid a total of €0.10 per share. Last year's total dividend payments show that ORBIS has a trailing yield of 1.5% on the current share price of €6.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've discovered 1 warning sign about ORBIS. View them for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. ORBIS paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether ORBIS generated enough free cash flow to afford its dividend. Luckily it paid out just 11% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for ORBIS

Click here to see how much of its profit ORBIS paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see ORBIS's earnings per share have risen 14% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, ORBIS has lifted its dividend by approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because ORBIS is keeping back more of its profits to grow the business.

Final Takeaway

Is ORBIS worth buying for its dividend? ORBIS has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in ORBIS for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for ORBIS you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.