Orchard Funding Group plc (LON:ORCH) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 12th of December in order to be eligible for this dividend, which will be paid on the 20th of December.

Orchard Funding Group's next dividend payment will be UK£0.02 per share. Last year, in total, the company distributed UK£0.03 to shareholders. Last year's total dividend payments show that Orchard Funding Group has a trailing yield of 3.7% on the current share price of £0.82. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Orchard Funding Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Orchard Funding Group's payout ratio is modest, at just 39% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Orchard Funding Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Orchard Funding Group earnings per share are up 2.2% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past four years, Orchard Funding Group has increased its dividend at approximately 1.6% a year on average.

To Sum It Up

Is Orchard Funding Group worth buying for its dividend? Orchard Funding Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Orchard Funding Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Want to learn more about Orchard Funding Group's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.