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The board of OFG Bancorp (NYSE:OFG) has announced that it will be increasing its dividend by 20% on the 15th of April to $0.30, up from last year's comparable payment of $0.25. This takes the annual payment to 2.5% of the current stock price, which unfortunately is below what the industry is paying.
OFG Bancorp's Payment Expected To Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end.
OFG Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past records don't necessarily translate into future results, the company's payout ratio of 24% also shows that OFG Bancorp is able to comfortably pay dividends.
The next 3 years are set to see EPS grow by 5.5%. Analysts estimate the future payout ratio will be 24% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for OFG Bancorp
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.32 in 2015, and the most recent fiscal year payment was $1.00. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that OFG Bancorp has grown earnings per share at 36% per 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
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for OFG Bancorp (of which 1 shouldn't be ignored!) 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.