Stock Analysis

OSB Group's (LON:OSB) Upcoming Dividend Will Be Larger Than Last Year's

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The board of OSB Group Plc (LON:OSB) has announced that it will be paying its dividend of £0.335 on the 17th of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 6.2%.

Check out our latest analysis for OSB Group

OSB Group's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

OSB Group has a good history of paying out dividends, with its current track record at 8 years. Past distributions do not necessarily guarantee future ones, but OSB Group's payout ratio of 34% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 39.0%. Analysts forecast the future payout ratio could be 38% over the same time horizon, which is a number we think the company can maintain.

LSE:OSB Historic Dividend March 19th 2023

OSB Group's Dividend Has Lacked Consistency

OSB Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of £0.039 in 2015 to the most recent total annual payment of £0.305. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. OSB Group has impressed us by growing EPS at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

OSB Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for OSB Group (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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