OFG Bancorp's (NYSE:OFG) Shareholders Will Receive A Bigger Dividend Than Last Year
The board of OFG Bancorp (NYSE:OFG) has announced that it will be paying its dividend of $0.22 on the 17th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.
View our latest analysis for OFG Bancorp
OFG Bancorp's Payment Expected To Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
OFG Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, OFG Bancorp's latest earnings report puts its payout ratio at 21%, showing that the company can pay out its dividends comfortably.
Over the next year, EPS is forecast to fall by 3.3%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 28%, 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
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from $0.24 total annually to $0.88. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. OFG Bancorp has impressed us by growing EPS at 32% per 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
Overall, a dividend increase is always good, and we think that OFG Bancorp is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for OFG Bancorp (1 doesn't sit too well with us!) that you should be aware of before investing. 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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