Opus Bank (NASDAQ:OPB) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 5th of February in order to be eligible for this dividend, which will be paid on the 20th of February.
Opus Bank’s next dividend payment will be US$0.11 per share. Last year, in total, the company distributed US$0.44 to shareholders. Looking at the last 12 months of distributions, Opus Bank has a trailing yield of approximately 1.6% on its current stock price of $27.02. If you buy this business for its dividend, you should have an idea of whether Opus Bank’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Opus Bank’s payout ratio is modest, at just 26% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it’s a relief to see Opus Bank earnings per share are up 3.8% per annum over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Opus Bank has delivered an average of 17% per year annual increase in its dividend, based on the past five years of dividend payments. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Opus Bank? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Opus Bank more closely.
Curious what other investors think of Opus Bank? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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