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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that OFG Bancorp (NYSE:OFG) is about to go ex-dividend in just 2 days. You can purchase shares before the 30th of December in order to receive the dividend, which the company will pay on the 15th of January.
OFG Bancorp's upcoming dividend is US$0.07 a share, following on from the last 12 months, when the company distributed a total of US$0.28 per share to shareholders. Based on the last year's worth of payments, OFG Bancorp has a trailing yield of 1.6% on the current stock price of $17.77. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out 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. Fortunately OFG Bancorp's payout ratio is modest, at just 33% of profit.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by OFG Bancorp's 12% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. OFG Bancorp has delivered 5.8% dividend growth per year on average over the past 10 years.
The Bottom Line
Should investors buy OFG Bancorp for the upcoming dividend? OFG Bancorp's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
So if you want to do more digging on OFG Bancorp, you'll find it worthwhile knowing the risks that this stock faces. For example - OFG Bancorp has 4 warning signs we think you should be aware of.