Omnicom Group Inc. (NYSE:OMC) will pay a dividend of $0.70 on the 12th of October. The dividend yield will be 3.6% based on this payment which is still above the industry average.
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Omnicom Group’s Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn’t matter much if the payments can’t be sustained. Based on the last payment, Omnicom Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
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The next year is set to see EPS grow by 19.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.
Omnicom Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $1.20 total annually to $2.80. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
We Could See Omnicom Group’s Dividend Growing
The company’s investors will be pleased to have been receiving dividend income for some time. It’s encouraging to see that Omnicom Group has been growing its earnings per share at 7.1% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Omnicom Group Looks Like A Great Dividend Stock
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In summary, it is good to see that the dividend is staying consistent, and we don’t think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we’ve identified 1 warning sign for Omnicom Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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