The board of Oppenheimer Holdings Inc. (NYSE:OPY) has announced that it will pay a dividend on the 29th of August, with investors receiving $0.18 per share. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.
Oppenheimer Holdings' Projected Earnings Seem Likely To Cover Future Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Oppenheimer Holdings' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
If the trend of the last few years continues, EPS will grow by 14.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 7.9% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Oppenheimer Holdings
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from $0.44 total annually to $0.72. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Oppenheimer Holdings might have put its house in order since then, but we remain cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Oppenheimer Holdings has seen EPS rising for the last five years, at 14% per annum. 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
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Oppenheimer Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Oppenheimer Holdings (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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