Two Days Left To Buy Orkla ASA (OB:ORK) Before The Ex-Dividend Date

It looks like Orkla ASA (OB:ORK) is about to go ex-dividend in the next two days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Orkla's shares before the 25th of April in order to be eligible for the dividend, which will be paid on the 6th of May.

The company's next dividend payment will be kr010.00 per share. Last year, in total, the company distributed kr10.00 to shareholders. Last year's total dividend payments show that Orkla has a trailing yield of 8.2% on the current share price of kr0121.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've discovered 1 warning sign about Orkla. View them for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Orkla paid out 66% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Orkla generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (79%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Orkla

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Orkla, with earnings per share up 9.7% on average over the last five years. Decent historical earnings per share growth suggests Orkla has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Orkla has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Orkla? Earnings per share have been growing modestly and Orkla paid out a bit over half of its earnings and free cash flow last year. To summarise, Orkla looks okay on this analysis, although it doesn't appear a stand-out opportunity.

However if you're still interested in Orkla as a potential investment, you should definitely consider some of the risks involved with Orkla. Our analysis shows 1 warning sign for Orkla and you should be aware of this before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.