Yahoo Finance Origin Energy Limited (ASX:ORG) Looks Interesting, And It's About To Pay A Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Origin Energy Limited (ASX:ORG) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 2nd of March in order to be eligible for this dividend, which will be paid on the 27th of March.
Origin Energy's next dividend payment will be AU$0.15 per share, and in the last 12 months, the company paid a total of AU$0.30 per share. Looking at the last 12 months of distributions, Origin Energy has a trailing yield of approximately 4.1% on its current stock price of A$7.31. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Origin Energy has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Origin Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Origin Energy is paying out an acceptable 52% of its profit, a common payout level among most companies. 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. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Origin Energy's earnings per share have risen 15% per annum over the last five years. Origin Energy is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Origin Energy has seen its dividend decline 5.0% per annum on average over the past ten years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Is Origin Energy an attractive dividend stock, or better left on the shelf? Origin Energy's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Origin Energy looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Ever wonder what the future holds for Origin Energy? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
