The board of Oracle Corporation (NYSE:ORCL) has announced that it will pay a dividend of $0.40 per share on the 23rd of January. This means the annual payment is 1.0% of the current stock price, which is above the average for the industry.
See our latest analysis for Oracle
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Oracle’s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 69.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2015, the annual payment back then was $0.48, compared to the most recent full-year payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Investors could be attracted to the stock based on the quality of its payment history. Oracle has impressed us by growing EPS at 5.1% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In summary, it is good to see that the dividend is staying consistent, and we don’t think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we’ve identified 1 warning sign for Oracle that investors need to be conscious of moving forward. Is Oracle not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
