O-Bank (TWSE:2897) Is Increasing Its Dividend To NT$0.4412

The board of O-Bank Co., Ltd. (TWSE:2897) has announced that it will be paying its dividend of NT$0.4412 on the 20th of August, an increased payment from last year's comparable dividend. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for O-Bank

O-Bank's Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having paid out dividends for 9 years, O-Bank has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but O-Bank's payout ratio of 48% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next year, EPS could expand by 12.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 41% by next year, which is in a pretty sustainable range.

O-Bank's Dividend Has Lacked Consistency

Looking back, O-Bank's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from NT$0.40 total annually to NT$0.45. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. O-Bank has seen EPS rising for the last five years, at 13% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like O-Bank's Dividend

Overall, a dividend increase is always good, and we think that O-Bank is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for O-Bank that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com