O-Bank (TWSE:2897) Is Paying Out A Larger Dividend Than Last Year

O-Bank Co., Ltd.'s (TWSE:2897) periodic dividend will be increasing on the 20th of August to NT$0.45, with investors receiving 18% more than last year's NT$0.38. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.

View our latest analysis for O-Bank

O-Bank's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it 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. While past data isn't a guarantee for the future, O-Bank's latest earnings report puts its payout ratio at 19%, showing that the company can pay out its dividends comfortably.

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 42% 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. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was NT$0.40 in 2015, and the most recent fiscal year payment was NT$0.38. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that O-Bank has grown earnings per share at 13% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like O-Bank's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for O-Bank that you should be aware of before investing. Is O-Bank not quite the opportunity you were looking for? Why not check out our selection of top 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