Oxford Industries (NYSE:OXM) Is Increasing Its Dividend To US$0.42

The board of Oxford Industries, Inc. (NYSE:OXM) has announced that it will be increasing its dividend on the 30th of July to US$0.42. The announced payment will take the dividend yield to 1.3%, which is in line with the average for the industry.

Check out our latest analysis for Oxford Industries

Oxford Industries' Distributions May Be Difficult To Sustain

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Even though Oxford Industries isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Recent, EPS has fallen by 35.4%, so this could continue over the next year. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the dividend has gone from US$0.44 to US$1.48. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Oxford Industries' earnings per share has shrunk at 35% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Oxford Industries will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Oxford Industries that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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