OP Bancorp (NASDAQ:OPBK) Is Increasing Its Dividend To $0.12

The board of OP Bancorp (NASDAQ:OPBK) has announced that it will be paying its dividend of $0.12 on the 25th of August, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 4.3%, which is below the industry average.

View our latest analysis for OP Bancorp

OP Bancorp's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

OP Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Despite the company's shorter dividend history however, calculating for its payout ratio of 18% shows that OP Bancorp is able to comfortably pay dividends.

EPS is set to fall by 6.9% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 28%, which would be comfortable for the company to continue in the future.

OP Bancorp Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2018, the dividend has gone from $0.20 total annually to $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. OP Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that OP Bancorp has grown earnings per share at 28% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like OP Bancorp'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 generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, OP Bancorp has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is OP Bancorp 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.