OSB Group (LON:OSB) Is Increasing Its Dividend To £0.102

The board of OSB Group Plc (LON:OSB) has announced that it will be paying its dividend of £0.102 on the 20th of September, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 7.7%.

View our latest analysis for OSB Group

OSB Group's Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

OSB Group has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but OSB Group's payout ratio of 55% is a good sign for current shareholders as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 110.6%. The future payout ratio could be 41% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

OSB Group's Dividend Has Lacked Consistency

Looking back, OSB Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was £0.039 in 2015, and the most recent fiscal year payment was £0.305. This means that it has been growing its distributions at 29% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.7% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.7% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On OSB Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for OSB Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.