Organon's (NYSE:OGN) Dividend Will Be $0.28

Organon & Co.'s (NYSE:OGN) investors are due to receive a payment of $0.28 per share on 13th of March. The dividend yield will be 7.3% based on this payment which is still above the industry average.

Check out our latest analysis for Organon

Organon's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Organon'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.

Unless the company can turn things around, EPS could fall by 23.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 51%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Organon Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The payments haven't really changed that much since 4 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Organon's EPS has fallen by approximately 24% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Organon's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Organon you should be aware of, and 2 of them are potentially serious. Is Organon not quite the opportunity you were looking for? Why not check out our selection of top 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.