OFG Bancorp (NYSE:OFG) Is Increasing Its Dividend To $0.22
OFG Bancorp's (NYSE:OFG) dividend will be increasing from last year's payment of the same period to $0.22 on 17th of July. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.
Check out our latest analysis for OFG Bancorp
OFG Bancorp's Dividend Forecasted To Be Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
OFG Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, OFG Bancorp's payout ratio sits at 21%, an extremely comfortable number that shows that it can pay its dividend.
EPS is set to fall by 3.3% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 25%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from $0.24 total annually to $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that OFG Bancorp has been growing its earnings per share at 32% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
OFG Bancorp Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for OFG Bancorp you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
