Attention dividend hunters! Olam International Limited (SGX:O32) will be distributing its dividend of S$0.04 per share on the 10 May 2019, and will start trading ex-dividend in 3 days time on the 02 May 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let's take a look at Olam International's most recent financial data to examine its dividend characteristics in more detail.
Check out our latest analysis for Olam International
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
-
Is its annual yield among the top 25% of dividend-paying companies?
-
Has it paid dividend every year without dramatically reducing payout in the past?
-
Has it increased its dividend per share amount over the past?
-
Can it afford to pay the current rate of dividends from its earnings?
-
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Olam International pass our checks?
Olam International has a trailing twelve-month payout ratio of 82%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Olam International has a yield of 3.8%, which is high for Consumer Retailing stocks but still below the market's top dividend payers.
Next Steps:
Taking all the above into account, Olam International is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three fundamental factors you should further research: