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Is It Smart To Buy Oppenheimer Holdings Inc. (NYSE:OPY) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Oppenheimer Holdings Inc. (NYSE:OPY) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Oppenheimer Holdings' shares on or after the 9th of February, you won't be eligible to receive the dividend, when it is paid on the 24th of February.

The company's next dividend payment will be US$0.15 per share, and in the last 12 months, the company paid a total of US$0.60 per share. Based on the last year's worth of payments, Oppenheimer Holdings stock has a trailing yield of around 1.3% on the current share price of $47.09. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Oppenheimer Holdings can afford its dividend, and if the dividend could grow.

View our latest analysis for Oppenheimer Holdings

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. Oppenheimer Holdings paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Oppenheimer Holdings paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Oppenheimer Holdings's earnings per share have risen 12% per annum over the last five years.

Oppenheimer Holdings also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Oppenheimer Holdings has increased its dividend at approximately 3.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Oppenheimer Holdings is keeping back more of its profits to grow the business.

The Bottom Line

Has Oppenheimer Holdings got what it takes to maintain its dividend payments? Companies like Oppenheimer Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Oppenheimer Holdings more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Oppenheimer Holdings you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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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