Origin Enterprises (ISE:OIZ) Has Announced That It Will Be Increasing Its Dividend To €0.1365

Origin Enterprises plc (ISE:OIZ) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of February to €0.1365. This will take the dividend yield to an attractive 5.4%, providing a nice boost to shareholder returns.

View our latest analysis for Origin Enterprises

Origin Enterprises' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Origin Enterprises was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 15.7%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.173 in 2013 to the most recent total annual payment of €0.168. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Origin Enterprises May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Although it's important to note that Origin Enterprises' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Origin Enterprises could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Origin Enterprises' 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. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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 instance, we've picked out 2 warning signs for Origin Enterprises that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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