Oppenheimer Holdings (NYSE:OPY) Is Paying Out A Larger Dividend Than Last Year

Oppenheimer Holdings Inc. (NYSE:OPY) will increase its dividend on the 26th of August to US$0.15. This makes the dividend yield 3.4%, which is above the industry average.

View our latest analysis for Oppenheimer Holdings

Oppenheimer Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Oppenheimer Holdings was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 62.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 7.1% by next year, which we think can be pretty sustainable going forward.

Oppenheimer Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from US$0.44 to US$0.60. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Oppenheimer Holdings has seen EPS rising for the last five years, at 62% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Oppenheimer Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Oppenheimer Holdings (2 don't sit too well with us!) 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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