OFG Bancorp (OFG) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 2.18% since the start of the year. The financial holding company is currently shelling out a dividend of $0.2 per share, with a dividend yield of 2.95%. This compares to the Banks - Northeast industry's yield of 2.67% and the S&P 500's yield of 1.73%.
In terms of dividend growth, the company's current annualized dividend of $0.80 is up 100% from last year. Over the last 5 years, OFG Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 23.16%. 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%. This means 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 $3.37 per share, representing a year-over-year earnings growth rate of 19.93%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. That said, they can take comfort from the fact that OFG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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