It looks like Opus Bank (NASDAQ:OPB) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 7th of August to receive the dividend, which will be paid on the 22nd of August.
Opus Bank’s next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.44 per share. Looking at the last 12 months of distributions, Opus Bank has a trailing yield of approximately 2.0% on its current stock price of $21.76. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Opus Bank has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth It could become a concern if earnings started to decline.
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?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Opus Bank’s earnings per share have plummeted approximately 35% a year over the previous five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Opus Bank has delivered 17% dividend growth per year on average over the past 5 years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Opus Bank is already paying out a high percentage of its income, so without earnings growth, we’re doubtful of whether this dividend will grow much in the future.
The Bottom Line
From a dividend perspective, should investors buy or avoid Opus Bank? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we’re just not that interested in this company’s dividend.
Ever wonder what the future holds for Opus Bank? See what the five 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.