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Ocean Wilsons Holdings Limited (LON:OCN) stock is about to trade ex-dividend in 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Ocean Wilsons Holdings' shares on or after the 24th of April will not receive the dividend, which will be paid on the 28th of May.
The company's next dividend payment will be US$1.22 per share, on the back of last year when the company paid a total of US$1.22 to shareholders. Based on the last year's worth of payments, Ocean Wilsons Holdings has a trailing yield of 6.5% on the current stock price of UK£14.10. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Ocean Wilsons Holdings can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ocean Wilsons Holdings paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 16% of its free cash flow in the last year.
Check out our latest analysis for Ocean Wilsons Holdings
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?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Ocean Wilsons Holdings reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.