Is OPRA's Dividend Sustainable Amid Rising Financial Risks?

The question of whether Opera Limited (OPRA) can sustain its generous dividend amid evolving financial risks hinges on a nuanced interplay of payout ratios, earnings growth, and cash flow dynamics. While the company's dividend yield of 6.17% as of late 2025 appears attractive, conflicting signals in its financial metrics-ranging from a payout ratio of 46.3% to 88%-highlight the complexity of assessing its sustainability. This analysis examines the data to determine whether OPRA's dividend remains a safe bet for income-focused investors.

Payout Ratio Discrepancies: A Tale of Two Metrics

Opera's dividend payout ratio has been a focal point of debate. According to a report by Simply Wall Street, the company's trailing payout ratio stood at 46.3% as of December 2024, suggesting a relatively conservative distribution of earnings. However, Q3 2025 results revealed a starkly different picture: a payout ratio of 1.33 (dividends per share divided by earnings per share), indicating that the semi-annual $0.40 per share dividend exceeded earnings in the quarter. This discrepancy arises from the timing of earnings and dividend payments. For instance, while Opera's full-year 2025 guidance projects $600–603 million in revenue and $138–141 million in adjusted EBITDA, quarterly earnings volatility-such as the Q3 EPS miss-can temporarily inflate the payout ratio.

The high payout ratio raises red flags. A ratio above 100% implies that the company is distributing more in dividends than it earns in a given period, relying on retained earnings or cash reserves to fund the shortfall. While Opera's $119 million cash balance provides a buffer, this practice is not sustainable in the long term without consistent earnings growth.

Earnings Growth and Cash Flow Coverage: Strengths and Weaknesses

Opera's revenue growth remains robust, with Q3 2025 results showing a 23% year-over-year increase to $151.9 million, driven by 27% growth in advertising revenue. Adjusted EBITDA of $36.3 million in the quarter further underscores operational efficiency. These metrics support the argument that Opera's earnings base is expanding, potentially allowing the company to sustain its dividend as long as growth continues.

However, cash flow coverage tells a more mixed story. Net cash flow from operations in Q3 2025 was $28.5 million, or 78% of adjusted EBITDA, which appears sufficient to cover the $35.8 million dividend paid in July. Yet free cash flow-a more stringent measure declined 29% year-over-year to $21.3 million, representing only 59% of adjusted EBITDA. This decline, coupled with a 29% increase in operating expenses to $129.7 million, suggests that while Opera generates strong cash flow, its ability to convert this into free cash for dividends is under pressure.

Risks to Dividend Sustainability

The primary risk lies in the volatility of Opera's payout ratio. A report by AlphaPilot notes that the 46.3% payout ratio as of December 2024 contrasts sharply with the Q3 2025 ratio of 1.33, reflecting the cyclical nature of earnings. If Opera's growth slows-whether due to macroeconomic headwinds or saturation in its core advertising and query revenue streams-the company may struggle to maintain its dividend.

Moreover, Opera's reliance on cash reserves to fund dividends introduces liquidity risks. While the company is debt-free and holds $119 million in cash, this amount is less than the $35.8 million dividend paid in a single quarter. If cash flow from operations weakens, Opera may need to draw down its cash reserves, which could limit its flexibility to invest in growth initiatives or weather downturns.

Conclusion: A Dividend with Caveats

Opera's dividend appears well-supported in the short term by strong revenue growth and a robust cash position. The company's ability to raise full-year revenue guidance to $600–603 million and its debt-free balance sheet are positives. However, the high and volatile payout ratio, coupled with declining free cash flow, introduces significant uncertainty. For income-focused investors, OPRA's dividend offers an attractive yield but requires careful monitoring of earnings trends and cash flow dynamics.

In the end, Opera's dividend sustainability will depend on its ability to maintain earnings growth while managing expenses. If the company can stabilize its free cash flow and reduce its payout ratio to a more sustainable level-say, below 100%-the dividend could remain a compelling proposition. Until then, investors should approach with caution.