Oracle Financial Services Software's (NSE:OFSS) Dividend Will Be Increased To ₹265.00

Oracle Financial Services Software Limited (NSE:OFSS) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of May to ₹265.00. This makes the dividend yield 3.0%, which is above the industry average.

We've discovered 1 warning sign about Oracle Financial Services Software. View them for free.

Oracle Financial Services Software's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to rise by 31.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 70% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Oracle Financial Services Software

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ₹970.00 total annually to ₹265.00. The dividend has fallen 73% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Oracle Financial Services Software has seen EPS rising for the last five years, at 10.0% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

Oracle Financial Services Software's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Oracle Financial Services Software that investors should know about before committing capital to this stock. Is Oracle Financial Services Software not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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