Oracle (NYSE:ORCL) Will Pay A Dividend Of $0.40

Oracle Corporation (NYSE:ORCL) has announced that it will pay a dividend of $0.40 per share on the 24th of October. This makes the dividend yield 1.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Oracle

Oracle's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Oracle's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 71.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Oracle Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.48 in 2014 to the most recent total annual payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 4.7% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We Really Like Oracle's Dividend

Overall, we like to see the dividend staying consistent, and we think Oracle might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Oracle that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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