Old Mutual Limited (JSE:OMU) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Old Mutual’s shares before the 9th of April to receive the dividend, which will be paid on the 14th of April.
The company’s upcoming dividend is R00.52 a share, following on from the last 12 months, when the company distributed a total of R0.86 per share to shareholders. Looking at the last 12 months of distributions, Old Mutual has a trailing yield of approximately 8.4% on its current stock price of R010.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Old Mutual has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Old Mutual paid out a comfortable 49% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for Old Mutual
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we’re not too excited that Old Mutual’s earnings are down 2.7% a year over the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Old Mutual’s dividend payments per share have declined at 5.1% per year on average over the past 10 years, which is uninspiring. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.