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oOh!media Limited (ASX:OML) has announced that it will pay a dividend of A$0.0175 per share on the 23rd of September. The dividend yield is 3.9% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for oOh!media
oOh!media's Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before this announcement, oOh!media was paying out 81% of earnings, but a comparatively small 20% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Looking forward, earnings per share is forecast to rise by 70.0% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 44% which would be quite comfortable going to take the dividend forward.
oOh!media's Dividend Has Lacked Consistency
Looking back, oOh!media's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from A$0.056 total annually to A$0.0525. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth May Be Hard To Come By
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though oOh!media's EPS has declined at around 7.1% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On oOh!media's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for oOh!media that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.