Oak Valley Bancorp (NASDAQ:OVLY) Has Affirmed Its Dividend Of US$0.14

Oak Valley Bancorp (NASDAQ:OVLY) has announced that it will pay a dividend of US$0.14 per share on the 13th of August. This payment means the dividend yield will be 1.7%, which is below the average for the industry.

Check out our latest analysis for Oak Valley Bancorp

Oak Valley Bancorp's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Oak Valley Bancorp was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 25.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Oak Valley Bancorp Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The first annual payment during the last 8 years was US$0.10 in 2013, and the most recent fiscal year payment was US$0.29. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Oak Valley Bancorp has grown earnings per share at 25% 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 Oak Valley Bancorp's Dividend

Overall, we like to see the dividend staying consistent, and we think Oak Valley Bancorp might even raise payments in the future. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Oak Valley Bancorp 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 performing dividend stock.

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