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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see OneSpan Inc. (NASDAQ:OSPN) is about to trade ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Meaning, you will need to purchase OneSpan's shares before the 16th of May to receive the dividend, which will be paid on the 6th of June.
The upcoming dividend for OneSpan will put a total of US$0.12 per share in shareholders' pockets. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
We've discovered 1 warning sign about OneSpan. View them for free.
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. OneSpan has a low and conservative payout ratio of just 16% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 9.1% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that OneSpan's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for OneSpan
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see OneSpan's earnings have been skyrocketing, up 51% per annum for the past five years. OneSpan earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'