Oron Group Investments & Holdings' (TLV:ORON) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Oron Group Investments & Holdings Ltd (TLV:ORON) has announced that the dividend on 12th of June will be increased to ₪0.3071, which will be 33% higher than last year's payment of ₪0.23 which covered the same period. The payment will take the dividend yield to 2.2%, which is in line with the average for the industry.

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Oron Group Investments & Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Oron Group Investments & Holdings' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 12.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 74% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Oron Group Investments & Holdings

Oron Group Investments & Holdings Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the dividend has gone from ₪0.0752 total annually to ₪0.23. This implies that the company grew its distributions at a yearly rate of about 45% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Oron Group Investments & Holdings has impressed us by growing EPS at 12% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Oron Group Investments & Holdings' payments are rock solid. While Oron Group Investments & Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, Oron Group Investments & Holdings has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Oron Group Investments & Holdings not quite the opportunity you were looking for? Why not check out 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.