OFG Bancorp (NYSE:OFG) will increase its dividend from last year's comparable payment on the 17th of October to $0.20. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.
OFG Bancorp's Dividend Forecasted To Be Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much.
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 17%, an extremely comfortable number that shows that it can pay its dividend.
The next year is set to see EPS grow by 9.8%. If the dividend continues on this path, the future payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $0.24 in 2012, and the most recent fiscal year payment was $0.80. This means that it has been growing its distributions at 13% per annum over that time. 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
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. OFG Bancorp has seen EPS rising for the last five years, at 24% per annum. 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, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for OFG Bancorp that you should be aware of before investing. Is OFG Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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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