Updated 3/11/2025
Oil-Dri Corporation of America (ODC) might not be a household name, but it’s a well-established player in a niche market. The company produces sorbent products used in both consumer and industrial applications—think cat litter and oil-absorbent materials. This kind of business isn’t flashy, but it benefits from consistent demand.
Recently, ODC’s stock has been on the move, jumping over 9% in a single trading session. That kind of momentum raises the question: Is this stock a solid choice for dividend investors? While the yield isn’t particularly high, the company has a history of steady payouts and financial discipline.
Let’s break down ODC’s dividend profile, financial strength, valuation, and the potential risks that investors should consider before making any moves.
Key Dividend Metrics
📌 Dividend Yield: 1.36% (forward)
📌 Annual Dividend Rate: $0.62 per share
📌 Payout Ratio: 19.09% – Well below risk levels, meaning the dividend is highly sustainable
📌 5-Year Average Dividend Yield: 2.66% – Historically higher than where it is today
📌 Dividend Growth: Slow but steady increases
📌 Ex-Dividend Date: February 21, 2025 (most recent)
📌 Next Dividend Payment: March 7, 2025
Dividend Overview
ODC’s current dividend yield sits at 1.36%, which isn’t particularly high compared to many dividend-focused stocks. However, the real strength here is the company’s ability to maintain and grow its dividend over time. With a payout ratio of just 19.09%, the company is paying out a relatively small portion of its earnings, leaving plenty of room for future increases.
Looking at the five-year average yield of 2.66%, it’s clear that today’s yield is lower than usual. This suggests that the stock price has appreciated faster than the dividend has grown, making it a less attractive entry point for those strictly seeking yield. However, for investors who value dividend reliability over sheer yield percentage, ODC remains a solid choice.
Dividend Growth and Safety
One of the best things about ODC’s dividend is its sustainability. With a strong cash flow position—$74.7 million in operating cash flow over the past year—the company is more than capable of maintaining its payouts.
From a safety standpoint, ODC also looks strong. The company’s current ratio of 2.86 means it has ample short-term liquidity to cover expenses, including dividends. Additionally, its debt-to-equity ratio of 17.3% is relatively low, signaling that ODC isn’t relying heavily on borrowed money to fund operations.
While the company’s dividend growth hasn’t been aggressive, it has been steady. Given the low payout ratio and strong financial position, ODC could be in a position to increase its dividend more meaningfully in the future.
Chart Analysis
Overall Trend
The stock price for Oil-Dri Corporation of America (ODC) has been in a strong uptrend over the past several months. After a period of sideways movement in the middle of last year, a significant breakout occurred around December, pushing the stock to new highs. The price is now well above both the 50-day and 200-day moving averages, which indicates strong bullish momentum.
Moving Averages
The 50-day moving average has been climbing steadily, staying above the 200-day moving average since late last year. This signals a bullish trend, as the shorter-term moving average confirms ongoing upward momentum. The 200-day moving average has also started to slope upward, reinforcing the idea that the stock has entered a more extended period of strength rather than a short-term spike.
Volume Activity
Volume spikes are visible at key moments, especially during the breakout in December. This suggests that institutional investors or larger players may have been accumulating shares at that time. More recently, volume has settled into a more normalized range, but occasional bursts of buying activity continue to support the stock’s strength. The absence of heavy selling pressure indicates that investors are not rushing to take profits, which is a positive sign for continued stability.
Relative Strength Index (RSI)
The RSI has been trending higher, approaching the overbought territory above 70. This suggests that the stock is in strong demand, though it also hints at the possibility of a near-term pullback if buyers start to take profits. However, as long as RSI doesn’t stay above 80 for an extended period, the trend remains intact, and momentum could continue.
Recent Price Action
Looking at the last five trading days, the stock has been making higher highs and higher lows, which reinforces the bullish trend. The most recent candlestick shows a slight pullback from the daily high, but the closing price remains strong. This could indicate minor consolidation before another move upward, or it could be an early sign of some short-term resistance.
Support and Resistance Levels
The previous breakout zone around 40 now serves as an important support level. If the stock were to retrace, this area would likely attract buyers again. On the upside, there is some resistance forming near the recent high of 45.83. If the stock can push past this level with strong volume, the uptrend could extend further.
Market Sentiment
Overall, the price action, moving averages, and RSI all suggest that sentiment remains positive. With no major signs of a reversal yet, the stock appears to be riding solid momentum. However, the elevated RSI and strong recent gains mean that short-term volatility is a possibility.
Analyst Ratings
📈 Upgrade – On February 22, 2025, ODC received an upgrade from StockNews.com, moving from a hold rating to a buy rating. This shift was largely driven by the company’s strong quarterly earnings report, which exceeded market expectations. With solid financial results and improving operational efficiency, analysts saw renewed growth potential, leading to a more bullish stance.
📉 Downgrade – Just a few days later, on February 28, 2025, the same firm downgraded ODC back to a hold rating. The primary reason for this move was valuation concerns following the stock’s rapid price increase. Analysts noted that while ODC’s financial performance remains strong, its recent surge may have outpaced its intrinsic value, prompting a more cautious approach.
🔍 Consensus Price Target – There is no widely reported consensus price target for ODC at this time. The absence of a set target suggests that analysts have differing views on where the stock should be valued, likely due to its recent volatility.
These adjustments in ratings highlight the market’s mixed sentiment toward ODC. While the company’s fundamentals remain solid, valuation concerns are leading to a more balanced outlook. Investors watching ODC should consider both perspectives—strong earnings driving optimism versus the potential for near-term price corrections.
Earnings Report Summary
Oil-Dri Corporation of America just posted its latest quarterly earnings, and the numbers show a company that’s firing on all cylinders. Revenue came in at $116.9 million, up 11% from the same time last year. A good chunk of that growth came from the recent acquisition of Ultra Pet, which added 4% to the total, while the remaining 7% was due to price adjustments and a strong product mix.
The company’s gross profit also saw an 11% bump, reaching $34.4 million. That’s the tenth straight quarter of year-over-year margin expansion, which speaks volumes about Oil-Dri’s ability to manage costs and improve efficiency. That said, the cost of goods sold per ton rose by 11%, thanks to higher material, freight, and packaging expenses. Despite this, the company was able to maintain a solid gross margin of 29.5%.
Operating income jumped 15% to $17.5 million, driven by a better product mix and higher prices. However, expenses were on the rise as well. Selling, general, and administrative costs went up by 8% to $17 million, mainly due to higher compensation, increased advertising, and more spending on data analytics. The integration of Ultra Pet also added to expenses, but overall, the company absorbed these costs well.
Net income for the quarter rose to $12.9 million, up 4% from last year, while EBITDA climbed 16% to $22.2 million. The Business to Business (B2B) segment was particularly strong, generating $43.4 million in revenue, up 20% year-over-year. The fluids purification business played a big role, bringing in $26.5 million, a 17% increase fueled by demand from new renewable diesel plants. Meanwhile, the animal health segment saw an 82% jump to $7.7 million as demand picked up.
The Retail and Wholesale (R&W) division also performed well, with sales rising 6% to $73.5 million. Ultra Pet contributed $4.4 million to that total, particularly from its crystal cat litter products. Domestic clay-based cat litter revenue also climbed 2% to $51.3 million, thanks to strong demand for lightweight and coarse litter options. One standout was the EPA-approved Cat’s Pride Antibacterial Clumping Litter, which more than doubled in sales.
On the financial side, Oil-Dri wrapped up the quarter with $22.6 million in cash, slightly down from $23.5 million at the end of last fiscal year. The company continued investing in infrastructure improvements and repaid the remaining balance on a $10 million credit facility used to acquire Ultra Pet.
Overall, the latest earnings report paints a picture of a company that’s growing steadily, managing costs effectively, and making smart investments for the future. With strong demand across its key product categories and a well-executed acquisition strategy, Oil-Dri continues to build on its momentum.
Financial Health and Stability
A stable dividend depends on a strong financial foundation, and ODC appears to have that covered. Here’s a look at some of the key financial metrics:
✔️ Revenue Growth: 10.6% year-over-year – A solid rate for a mature company
✔️ Profit Margin: 9.8% – Consistent and stable
✔️ Operating Margin: 14.95% – Shows the company runs efficiently
✔️ Return on Equity (ROE): 21.12% – Indicates strong profitability relative to shareholder equity
✔️ Return on Assets (ROA): 11.94% – Suggests the company is effectively utilizing its assets
A particularly impressive number here is ODC’s 21.12% return on equity, which suggests it is generating strong returns for shareholders. This is well above the average for many industrial and consumer goods companies, reinforcing the idea that ODC is using its capital efficiently.
In terms of debt, the company appears conservative, with only $40.8 million in total debt and $22.59 million in cash. This balance sheet strength adds an extra layer of confidence for long-term dividend investors.
Valuation and Stock Performance
ODC’s stock price has surged recently, reaching a 52-week high of $49.71 after climbing from a low of $29.48. That kind of move suggests that investors are taking notice, but it also raises concerns about whether the stock has become too expensive.
Currently, ODC trades at:
📊 Price-to-Earnings (P/E) Ratio: 14.75 – A reasonable valuation but higher than in previous quarters
📊 Price-to-Book (P/B) Ratio: 2.97 – Somewhat expensive compared to industry norms
📊 Enterprise Value/EBITDA: 9.02 – A bit above historical levels
The price-to-sales ratio of 1.78 and the price-to-book ratio of 2.97 suggest that a lot of optimism is already baked into the stock price. For dividend investors, this means that while the company is fundamentally strong, it might not be the best time to initiate a position purely from a value perspective.
If the stock pulls back to more attractive levels, it could present a better opportunity for income investors looking for both capital appreciation and dividend stability.
Risks and Considerations
No stock is without risks, and ODC has a few that investors should keep in mind:
🔻 Commodity Price Sensitivity – The company relies on raw materials, and fluctuations in those costs could impact profitability.
🔻 Low Dividend Yield – Compared to other dividend stocks, ODC’s yield may not be high enough for those seeking substantial income.
🔻 Stock Price Volatility – The recent surge of over 9% in a single day suggests that the stock can move quickly, which may not appeal to conservative dividend investors.
🔻 Market Competition – While ODC has a niche focus, it still faces competition from larger players in the consumer and industrial sectors.
🔻 Potential Overvaluation – With the stock trading near its highs, there’s always a risk of a pullback if market conditions change or if earnings fail to keep pace with expectations.
Final Thoughts
Oil-Dri Corporation of America is a financially stable company with a reliable dividend and strong cash flow generation. While the yield isn’t particularly high, the company’s disciplined financial management and low payout ratio make it a safe bet for those looking for consistent, long-term income.
For dividend investors, the biggest question is whether now is the right time to buy. With the stock trading near its highs and the dividend yield lower than its historical average, it might be wise to wait for a better entry point. However, for those who already own shares, ODC remains a solid holding in a dividend-focused portfolio.
While it may not be the most exciting stock in the market, it is a steady performer that has shown resilience over time—something that income investors can always appreciate.
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