Owens Corning The stock (NYSE: OC) is about to trade ex-dividend in 4 days. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for a dividend payment. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. This means that investors who buy Owens Corning shares from July 15 will not receive the dividend, which will be paid on August 6.
The company’s next dividend payment will be US $ 0.26 per share, and over the past 12 months the company has paid a total of US $ 1.04 per share. Calculating the value of last year’s payouts shows Owens Corning has a 1.1% return on the current share price of $ 96.35. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. So we need to determine whether Owens Corning can afford its dividend and whether the dividend could increase.
Check out our latest analysis for Owens Corning
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Owens Corning only paid 14% of its profits last year, which in our opinion is moderately low and leaves a lot of room for unforeseen circumstances. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. The good thing is that dividends were well covered by free cash flow, with the company paying 12% of its cash flow last year.
It is positive to see that Owens Corning’s dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher. margin of safety before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall enough, the company could be forced to cut its dividend. Luckily for readers, Owens Corning’s earnings per share have grown 20% per year over the past five years. Earnings per share have grown rapidly and the company keeps the majority of its profits with the business. Fast-growing companies that reinvest heavily are attractive from a dividend standpoint, especially since they can often increase the payout ratio later.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past seven years, Owens Corning has increased its dividend to around 7.2% per year on average. We are happy to see dividends increasing along with earnings over a number of years, which may be a sign that the company intends to share the growth with its shareholders.
Should investors buy Owens Corning for the next dividend? We like that Owens Corning is increasing earnings per share while simultaneously paying a small percentage of earnings and cash flow. These characteristics suggest that the company is reinvesting in growing its business, while the prudent payout ratio also implies a reduced risk of dividend reduction in the future. It is a promising combination that should mark this company worthy of further attention.
With that in mind, an essential part of in-depth stock research is being aware of the risks stocks currently face. In terms of investment risks, we have identified 2 warning signs with Owens Corning and understanding them should be part of your investment process.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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