Oil-Dri Corporation of America (NYSE:ODC) Is Increasing Its Dividend To $0.31

Oil-Dri Corporation of America (NYSE:ODC) will increase its dividend on the 23rd of August to $0.31, which is 6.9% higher than last year's payment from the same period of $0.29. Despite this raise, the dividend yield of 1.8% is only a modest boost to shareholder returns.

See our latest analysis for Oil-Dri Corporation of America

Oil-Dri Corporation of America's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Oil-Dri Corporation of America was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 28.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Oil-Dri Corporation of America Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.76, compared to the most recent full-year payment of $1.16. This means that it has been growing its distributions at 4.3% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Oil-Dri Corporation of America has seen EPS rising for the last five years, at 28% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Oil-Dri Corporation of America Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Oil-Dri Corporation of America is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Oil-Dri Corporation of America 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 yield dividend stocks.

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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.

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