Should You Buy OUTsurance Group Limited (JSE:OUT) For Its Upcoming Dividend?
Readers hoping to buy OUTsurance Group Limited (JSE:OUT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase OUTsurance Group's shares on or after the 30th of September, you won't be eligible to receive the dividend, when it is paid on the 5th of October.
The company's next dividend payment will be R02.583 per share, and in the last 12 months, the company paid a total of R2.91 per share. Last year's total dividend payments show that OUTsurance Group has a trailing yield of 3.5% on the current share price of R084.18. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
See our latest analysis for OUTsurance Group
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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see OUTsurance Group's earnings have been skyrocketing, up 26% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, OUTsurance Group has lifted its dividend by approximately 9.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy OUTsurance Group for the upcoming dividend? Earnings per share are growing at an attractive rate, and OUTsurance Group is paying out a bit over half its profits. In summary, OUTsurance Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of OUTsurance Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.