Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
OFG Bancorp in Focus
OFG Bancorp (OFG) is headquartered in San Juan, and is in the Finance sector. The stock has seen a price change of 2.86% since the start of the year. The financial holding company is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.2%. This compares to the Banks - Northeast industry's yield of 2.49% and the S&P 500's yield of 1.72%.
Looking at dividend growth, the company's current annualized dividend of $0.60 is up 50% from last year. OFG Bancorp has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 18.62%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. OFG's current payout ratio is 20%, meaning it paid out 20% of its trailing 12-month EPS as dividend.
OFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.30 per share, with earnings expected to increase 17.44% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, OFG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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