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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Orchard Funding Group plc (LON:ORCH) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Orchard Funding Group's shares before the 9th of June in order to be eligible for the dividend, which will be paid on the 24th of June.
The company's next dividend payment will be UK£0.01 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 4.9% on the current share price of £0.61. 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! So we need to investigate whether Orchard Funding Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Orchard Funding Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Orchard Funding Group paid out 55% of its earnings to investors last year, a normal payout level for most businesses. Orchard Funding Group 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.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Orchard Funding Group earnings per share are up 3.2% per annum over the last five years.