Australia markets closed
  • ALL ORDS

    6,836.90
    +52.60 (+0.78%)
     
  • AUD/USD

    0.6839
    +0.0055 (+0.81%)
     
  • ASX 200

    6,648.00
    +53.50 (+0.81%)
     
  • OIL

    99.67
    +1.14 (+1.16%)
     
  • GOLD

    1,741.90
    +5.40 (+0.31%)
     
  • BTC-AUD

    29,907.16
    +311.24 (+1.05%)
     
  • CMC Crypto 200

    445.20
    +9.68 (+2.22%)
     

Olin Corporation (NYSE:OLN) Looks Interesting, And It's About To Pay A Dividend

  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Olin Corporation (NYSE:OLN) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Olin's shares on or after the 9th of May will not receive the dividend, which will be paid on the 10th of June.

The company's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.80 to shareholders. Based on the last year's worth of payments, Olin stock has a trailing yield of around 1.2% on the current share price of $64.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Olin has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Olin

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Olin has a low and conservative payout ratio of just 8.7% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 7.8% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Olin, with earnings per share up 2.9% on average over the last five years. Olin is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Olin's dividend payments are effectively flat on where they were 10 years ago.

Final Takeaway

Is Olin worth buying for its dividend? Earnings per share have been growing moderately, and Olin is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Olin is halfway there. It's a promising combination that should mark this company worthy of closer attention.

So while Olin looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 3 warning signs with Olin (at least 1 which can't be ignored), and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting