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Oriental Hotels Limited (NSE:ORIENTHOT) stock is about to trade ex-dividend in 2 days time. Investors can purchase shares before the 15th of July in order to be eligible for this dividend, which will be paid on the 22nd of August.
Oriental Hotels's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Based on the last year's worth of payments, Oriental Hotels stock has a trailing yield of around 1.3% on the current share price of ₹37.35. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Oriental Hotels is paying out just 9.8% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Oriental Hotels paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
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. That's why it's comforting to see Oriental Hotels's earnings have been skyrocketing, up 74% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Oriental Hotels's dividend payments per share have declined at 5.7% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Is Oriental Hotels worth buying for its dividend? It's great that Oriental Hotels is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Oriental Hotels looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Want to learn more about Oriental Hotels'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.
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