Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Orrstown Financial Services Inc (NASDAQ:ORRF) has paid dividends to shareholders, and these days it yields 2.0%. Let’s dig deeper into whether Orrstown Financial Services should have a place in your portfolio.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- 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?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does Orrstown Financial Services fit our criteria?
The company currently pays out 38.0% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 27.5%, leading to a dividend yield of around 2.2%. However, EPS should increase to $1.78, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from Orrstown Financial Services have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Orrstown Financial Services produces a yield of 2.0%, which is on the low-side for Banks stocks.
If you are building an income portfolio, then Orrstown Financial Services is a complicated choice since it has some positive aspects as well as negative ones. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ORRF’s future growth? Take a look at our free research report of analyst consensus for ORRF’s outlook.
- Valuation: What is ORRF 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 ORRF 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.