Orrstown Financial Services (NASDAQ:ORRF) Is Increasing Its Dividend To $0.27

The board of Orrstown Financial Services, Inc. (NASDAQ:ORRF) has announced that it will be paying its dividend of $0.27 on the 12th of August, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.1%.

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Orrstown Financial Services' Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Orrstown Financial Services has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Orrstown Financial Services' last earnings report, the payout ratio is at a decent 43%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 33.9%. If the dividend continues on this path, the future payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Orrstown Financial Services

Orrstown Financial Services Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.28 in 2015 to the most recent total annual payment of $1.08. This means that it has been growing its distributions at 14% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Orrstown Financial Services hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 1.5% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Orrstown Financial Services Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Orrstown Financial Services that investors need to be conscious of moving forward. 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.