Orora (ASX:ORA) Has Announced A Dividend Of A$0.05
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Orora's Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 200% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 52%, which is in a comfortable range for us.
View our latest analysis for Orora
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was A$0.075, compared to the most recent full-year payment of A$0.10. This means that it has been growing its distributions at 2.9% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Orora's Dividend Might Lack Growth
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Orora has grown earnings per share at 13% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Orora has 3 warning signs (and 1 which is concerning) we think you should know about. Is Orora not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.
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