OP Bancorp (NASDAQ:OPBK) will pay a dividend of $0.12 on the 23rd of November. This makes the dividend yield 5.7%, which will augment investor returns quite nicely.
OP Bancorp's Dividend Forecasted To Be Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
OP Bancorp has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 7.0% also shows that OP Bancorp is able to comfortably pay dividends.
Over the next 3 years, EPS is forecast to fall by 7.6%. Fortunately, analysts forecast the future payout ratio to be 35% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
OP Bancorp Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of $0.20 in 2018 to the most recent total annual payment of $0.48. This means that it has been growing its distributions at 19% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that OP Bancorp has been growing its earnings per share at 16% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
OP Bancorp Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think OP Bancorp might even raise payments in the future. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for OP Bancorp (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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.