Only Three Days Left To Cash In On Orient Electric's (NSE:ORIENTELEC) Dividend

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 Orient Electric Limited (NSE:ORIENTELEC) is about to go ex-dividend in just three days. You will need to purchase shares before the 9th of February to receive the dividend, which will be paid on the 28th of February.

Orient Electric's next dividend payment will be ₹0.75 per share, and in the last 12 months, the company paid a total of ₹1.25 per share. Based on the last year's worth of payments, Orient Electric has a trailing yield of 0.5% on the current stock price of ₹282.75. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Orient Electric

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Orient Electric's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Orient Electric generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.

It's positive to see that Orient Electric's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Orient Electric's earnings per share have fallen at approximately 8.1% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past three years, Orient Electric has increased its dividend at approximately 7.7% a year on average.

Final Takeaway

Should investors buy Orient Electric for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Orient Electric looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Orient Electric looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Orient Electric has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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