Be Sure To Check Out Orrstown Financial Services, Inc. (NASDAQ:ORRF) Before It Goes Ex-Dividend

Orrstown Financial Services, Inc. (NASDAQ:ORRF) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 29th of January will not receive the dividend, which will be paid on the 8th of February.

Orrstown Financial Services's next dividend payment will be US$0.18 per share, on the back of last year when the company paid a total of US$0.72 to shareholders. Looking at the last 12 months of distributions, Orrstown Financial Services has a trailing yield of approximately 3.9% on its current stock price of $18.61. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Orrstown Financial Services can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Orrstown Financial Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Orrstown Financial Services paid out a comfortable 28% of its profit last year.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Orrstown Financial Services's earnings have been skyrocketing, up 20% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Orrstown Financial Services has seen its dividend decline 2.0% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Has Orrstown Financial Services got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Orrstown Financial Services looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Orrstown Financial Services has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for Orrstown Financial Services (1 is a bit concerning!) that deserve your attention before investing in the shares.

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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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. 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.
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