Is It Worth Considering Orrstown Financial Services, Inc. (NASDAQ:ORRF) For Its Upcoming Dividend?

Orrstown Financial Services, Inc. (NASDAQ:ORRF) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 2nd of August will not receive the dividend, which will be paid on the 12th of August.

Orrstown Financial Services’s upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.60 per share to shareholders. Based on the last year’s worth of payments, Orrstown Financial Services has a trailing yield of 2.7% on the current stock price of $21.89. If you buy this business for its dividend, you should have an idea of whether Orrstown Financial Services’s dividend is reliable and sustainable. As a result, readers should always check whether Orrstown Financial Services has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Orrstown Financial Services

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 Orrstown Financial Services’s payout ratio is modest, at just 47% of profit.

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.

NasdaqCM:ORRF Historical Dividend Yield, July 29th 2019
NasdaqCM:ORRF Historical Dividend Yield, July 29th 2019

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It’s not encouraging to see that Orrstown Financial Services’s earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Orrstown Financial Services has seen its dividend decline 3.8% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Is Orrstown Financial Services an attractive dividend stock, or better left on the shelf? Orrstown Financial Services’s earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. We’re unconvinced on the company’s merits, and think there might be better opportunities out there.

Wondering what the future holds for Orrstown Financial Services? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.