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Readers hoping to buy OFG Bancorp (NYSE:OFG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase OFG Bancorp's shares before the 31st of December to receive the dividend, which will be paid on the 15th of January.
The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Calculating the last year's worth of payments shows that OFG Bancorp has a trailing yield of 2.3% on the current share price of US$43.27. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for OFG Bancorp
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. OFG Bancorp is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see OFG Bancorp has grown its earnings rapidly, up 22% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, OFG Bancorp has increased its dividend at approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Should investors buy OFG Bancorp for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. OFG Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.