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Omega Flex, Inc. (NASDAQ:OFLX) stock is about to trade ex-dividend in three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Omega Flex investors that purchase the stock on or after the 24th of September will not receive the dividend, which will be paid on the 4th of October.
The company's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Last year's total dividend payments show that Omega Flex has a trailing yield of 0.8% on the current share price of $145.41. 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 Omega Flex has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Omega Flex paying out a modest 47% of its earnings. 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. Dividends consumed 56% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Omega Flex'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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Omega Flex earnings per share are up 9.1% per annum over the last five years. Decent historical earnings per share growth suggests Omega Flex has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Omega Flex has delivered 14% dividend growth per year on average over the past eight years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Omega Flex? Earnings per share growth has been modest, and it's interesting that Omega Flex is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's hard to get excited about Omega Flex from a dividend perspective.
Want to learn more about Omega Flex's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
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.
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