Yahoo Finance It Might Not Be A Great Idea To Buy Ocean Wilsons Holdings Limited (LON:OCN) For Its Next Dividend
Readers hoping to buy Ocean Wilsons Holdings Limited (LON:OCN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Ocean Wilsons Holdings' shares before the 18th of May in order to be eligible for the dividend, which will be paid on the 15th of June.
The company's next dividend payment will be US$0.70 per share. Last year, in total, the company distributed US$0.70 to shareholders. Calculating the last year's worth of payments shows that Ocean Wilsons Holdings has a trailing yield of 6.2% on the current share price of £9. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Ocean Wilsons Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Ocean Wilsons Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Ocean Wilsons Holdings's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Ocean Wilsons Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 76% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
Click here to see how much of its profit Ocean Wilsons Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Ocean Wilsons Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ocean Wilsons Holdings has delivered 5.2% dividend growth per year on average over the past 10 years.
Get our latest analysis on Ocean Wilsons Holdings's balance sheet health here.
To Sum It Up
From a dividend perspective, should investors buy or avoid Ocean Wilsons Holdings? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Ocean Wilsons Holdings has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Although, if you're still interested in Ocean Wilsons Holdings and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 1 warning sign for Ocean Wilsons Holdings that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking 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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