OneSpan Inc. (NASDAQ:OSPN) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy OneSpan Inc. (NASDAQ:OSPN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase OneSpan's shares on or after the 16th of May, you won't be eligible to receive the dividend, when it is paid on the 6th of June.

The upcoming dividend for OneSpan is US$0.12 per share. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether OneSpan can afford its dividend, and if the dividend could grow.

Our free stock report includes 1 warning sign investors should be aware of before investing in OneSpan. Read for free now.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. OneSpan has a low and conservative payout ratio of just 16% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 9.1% of its free cash flow in the last year.

It's positive to see that OneSpan's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for OneSpan

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see OneSpan's earnings have been skyrocketing, up 51% per annum for the past five years. OneSpan looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

This is OneSpan's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Has OneSpan got what it takes to maintain its dividend payments? We love that OneSpan is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. OneSpan looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks OneSpan is facing. Our analysis shows 1 warning sign for OneSpan and you should be aware of it before buying any shares.

If you're in the market for strong dividend payers, we recommend checking 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.