OFG Bancorp (NYSE:OFG) increases its dividend to $0.22

OFG Bancorp (NYSE:OFG) will increase its dividend from last year’s comparable October 16 payment to $0.22. Even though the dividend has increased, the yield is still quite low at just 2.9%.

Check out our latest analysis for OFG Bancorp

OFG Bancorp’s profits will easily cover the payouts

Even a low dividend yield can be attractive if it continues over the years.

Paying dividends for at least 10 years, OFG Bancorp has a long history of paying out a portion of its profits to shareholders. While past data is no guarantee of the future, OFG Bancorp’s most recent earnings report shows a payout ratio of 22%, which shows that the company can comfortably pay dividends.

EPS is forecast to decline by 0.8% next year. However, assuming the dividend continues in line with recent trends, we believe the future payout ratio could be 25%, which we are quite comfortable with and would be doable on an earnings basis.

Dividend volatility

Although the company has been paying a dividend for a long time, it has cut it at least once in the last 10 years. The dividend increased from a total of $0.24 in 2013 to a recent total annual payment of $0.88. This means that during this period the company increased its distributions at a rate of approximately 14% per year. Dividends have been growing rapidly over this time, but given the cuts that have occurred in the past, we are unsure whether this stock will be a reliable source of income in the future.

The dividend is likely to increase

Growing earnings per share could be a mitigating factor given past dividend fluctuations. We’re pleased to see that OFG Bancorp has grown its earnings per share by 31% annually over the last five years. The low payout ratio gives the company a lot of flexibility, and growing earnings also make it easier for it to increase its dividend.

OFG Bancorp looks like a great dividend stock

Overall, we think this has the potential to be an attractive income stock, and things are getting better with a higher dividend payout this year. The company generates plenty of cash, and profits also cover payouts quite easily. It’s worth noting that earnings are expected to decline over the next 12 months, which won’t be a problem unless it becomes a trend, but it could cause some disruption next year. Taking all this into account, it looks like this could be a good dividend opportunity.

Companies with a stable dividend policy will likely enjoy greater investor interest than companies with a more inconsistent approach. Still, investors must consider many other factors besides dividend payments when analyzing a company. Example: we noticed 3 warning signs for OFG Bancorp (1 of which we didn’t like!) you should know about. Isn’t OFG Bancorp the opportunity you’ve been looking for? Check ours selection of companies with the highest dividend.

Have an opinion on this article? Worried about content? contact with us directly. Alternatively, email the editorial team (at) simplywallst.com.

This article by Simply Wall St is of a general nature. We comment based on historical data and analyst forecasts, using only an unbiased methodology, and our articles are not intended to provide financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative content. Simply Wall St has no position in any of the stocks mentioned.