Opera Limited (NASDAQ:OPRA) has announced that it will pay a dividend of $0.39 per share on the 13th of January. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.
See our latest analysis for Opera
Impressive dividend yields are good, but this doesn’t matter much if the payments can’t be sustained. Prior to this announcement, Opera was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
Looking forward, earnings per share is forecast to rise by 59.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.
The company hasn’t been paying a dividend for very long at all, so we can’t really make a judgement on how stable the dividend has been. This doesn’t mean that the company can’t pay a good dividend, but just that we want to wait until it can prove itself.
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. We are encouraged to see that Opera has grown earnings per share at 33% per year over the past five years. The company’s earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Opera could prove to be a strong dividend payer.
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Opera’s payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Opera has been making. We don’t think Opera is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we’ve picked out 2 warning signs for Opera that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
