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OGE Energy Corp. (NYSE:OGE) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase OGE Energy's shares before the 6th of October in order to be eligible for the dividend, which will be paid on the 27th of October.
The company's next dividend payment will be US$0.42 per share, and in the last 12 months, the company paid a total of US$1.66 per share. Looking at the last 12 months of distributions, OGE Energy has a trailing yield of approximately 5.0% on its current stock price of $33.33. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for OGE Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 75% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether OGE Energy generated enough free cash flow to afford its dividend. It paid out an unsustainably high 298% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
OGE Energy paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to OGE Energy's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see OGE Energy's earnings per share have dropped 6.7% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.