OFG Bancorp (NYSE:OFG) Is Increasing Its Dividend To $0.22
The board of OFG Bancorp (NYSE:OFG) has announced that it will be paying its dividend of $0.22 on the 16th of October, an increased payment from last year's comparable dividend. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that OFG Bancorp's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for OFG Bancorp
OFG Bancorp's Payment Expected To Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive.
Having distributed dividends for at least 10 years, OFG Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, OFG Bancorp's payout ratio sits at 22%, an extremely comfortable number that shows that it can pay its dividend.
Over the next year, EPS is forecast to fall by 0.8%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 25%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.24 in 2013 to the most recent total annual payment of $0.88. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. OFG Bancorp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that OFG Bancorp has grown earnings per share at 31% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like OFG Bancorp's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 3 warning signs for OFG Bancorp you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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