Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Opus Bank (NASDAQ:OPB) has paid a dividend to shareholders in the last few years. It currently yields 1.6%. Should it have a place in your portfolio? Let’s take a look at Opus Bank in more detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Opus Bank fare?
The company currently pays out 24.0% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 31.4%, leading to a dividend yield of 1.9%. In addition to this, EPS should increase to $1.69. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Opus Bank as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Opus Bank produces a yield of 1.6%, which is on the low-side for Banks stocks.
If Opus Bank is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for OPB’s future growth? Take a look at our free research report of analyst consensus for OPB’s outlook.
- Valuation: What is OPB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OPB is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.