Oil-Dri Corporation of America's (NYSE:ODC) Shareholders Will Receive A Smaller Dividend Than Last Year

Oil-Dri Corporation of America (NYSE:ODC) is reducing its dividend from last year's comparable payment to $0.155 on the 7th of March. This means that the annual payment is 1.4% of the current stock price, which is lower than what the rest of the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Oil-Dri Corporation of America's stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Oil-Dri Corporation of America

Oil-Dri Corporation of America's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Oil-Dri Corporation of America's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 23.5% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

Oil-Dri Corporation of America Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.76 total annually to $1.24. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Oil-Dri Corporation of America has been growing its earnings per share at 23% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Oil-Dri Corporation of America's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Oil-Dri Corporation of America does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income 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. For instance, we've picked out 1 warning sign for Oil-Dri Corporation of America that investors should take into consideration. 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.