It Might Not Be A Great Idea To Buy Oxford Industries, Inc. (NYSE:OXM) For Its Next Dividend

It looks like Oxford Industries, Inc. (NYSE:OXM) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 15th of April will not receive the dividend, which will be paid on the 30th of April.

Oxford Industries's upcoming dividend is US$0.37 a share, following on from the last 12 months, when the company distributed a total of US$1.48 per share to shareholders. Looking at the last 12 months of distributions, Oxford Industries has a trailing yield of approximately 1.7% on its current stock price of $88.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Oxford Industries has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Oxford Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Oxford Industries lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Oxford Industries didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Oxford Industries was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Oxford Industries has delivered 13% dividend growth per year on average over the past 10 years.

Get our latest analysis on Oxford Industries's balance sheet health here.

Final Takeaway

Is Oxford Industries an attractive dividend stock, or better left on the shelf? It's hard to get used to Oxford Industries paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that in mind though, if the poor dividend characteristics of Oxford Industries don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 3 warning signs for Oxford Industries that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade Oxford Industries, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.