Stock Analysis

Organon (NYSE:OGN) Is Due To Pay A Dividend Of $0.28

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NYSE:OGN
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The board of Organon & Co. (NYSE:OGN) has announced that it will pay a dividend on the 15th of September, with investors receiving $0.28 per share. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

View our latest analysis for Organon

Organon's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Organon's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 26.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:OGN Historic Dividend August 7th 2022

Organon Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. EPS has fallen over the last year, with this year's number 34% below last year. Such a large drop can indicate that the business has run into some trouble and might end up in the dividend having to be reduced. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

Our Thoughts On Organon's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Organon's payments, as there could be some issues with sustaining them into the future. 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 don't think Organon is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Organon (2 are concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Organon?

Organon & Co., a health care company, develops and delivers health solutions through a portfolio of prescription therapies in the United States and internationally.

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Rewards

  • Trading at 78.1% below our estimate of its fair value

  • Earnings are forecast to grow 7.85% per year

Risks

  • Debt is not well covered by operating cash flow

  • Negative shareholders equity

  • Profit margins (16.1%) are lower than last year (24.2%)

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About NYSE:OGN

Organon

Organon & Co., a health care company, develops and delivers health solutions through a portfolio of prescription therapies in the United States and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth2
Past Performance1
Financial Health1
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Undervalued second-rate dividend payer.