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The board of OFG Bancorp (NYSE:OFG) has announced that it will be paying its dividend of $0.22 on the 16th of October, an increased payment from last year's comparable dividend. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.
Check out 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 a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, OFG Bancorp's latest earnings report puts its payout ratio at 22%, showing that the company can pay out its dividends comfortably.
EPS is set to fall by 0.8% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 25%, which would be comfortable for the company to continue in the future.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that OFG Bancorp has been growing its earnings per share at 31% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
OFG Bancorp Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, OFG Bancorp has 3 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.