Oriental Aromatics (NSE:OAL) Is Due To Pay A Dividend Of ₹0.50

Oriental Aromatics Limited (NSE:OAL) will pay a dividend of ₹0.50 on the 20th of September. The dividend yield is 0.1% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Oriental Aromatics

Oriental Aromatics' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Oriental Aromatics' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 30.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The last annual payment of ₹0.50 was flat on the annual payment from10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Oriental Aromatics' earnings per share has shrunk at 31% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Oriental Aromatics' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Oriental Aromatics has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Oriental Aromatics 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.

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