On the Beach Group plc (LON:OTB) Will Pay A UK£0.009 Dividend In Four Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that On the Beach Group plc (LON:OTB) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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, On the Beach Group investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 28th of June.

The company's next dividend payment will be UK£0.009 per share. Last year, in total, the company distributed UK£0.018 to shareholders. Calculating the last year's worth of payments shows that On the Beach Group has a trailing yield of 1.3% on the current share price of UK£1.394. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether On the Beach Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for On the Beach Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. On the Beach Group has a low and conservative payout ratio of just 9.5% of its income after tax. On the Beach Group paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by On the Beach Group's 10% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. On the Beach Group has seen its dividend decline 2.8% per annum on average over the past seven years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Is On the Beach Group an attractive dividend stock, or better left on the shelf? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think this is a pretty attractive combination, and would be interested in investigating On the Beach Group more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that On the Beach Group is showing 3 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.