Oak Valley Bancorp (NASDAQ:OVLY) Will Pay A Larger Dividend Than Last Year At $0.15

Oak Valley Bancorp (NASDAQ:OVLY) will increase its dividend on the 12th of August to $0.15, which is 3.4% higher than last year's payment from the same period of $0.145. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

View our latest analysis for Oak Valley Bancorp

Oak Valley Bancorp's Earnings Will Easily Cover The Distributions

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

Oak Valley Bancorp has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Using data from its latest earnings report, Oak Valley Bancorp's payout ratio sits at 17%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share could rise by 9.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 16% by next year, which is in a pretty sustainable range.

Oak Valley Bancorp Is Still Building Its Track Record

Oak Valley Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2013, the dividend has gone from $0.10 total annually to $0.30. This means that it has been growing its distributions at 13% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Oak Valley Bancorp has impressed us by growing EPS at 9.3% 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.

Oak Valley Bancorp 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. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 1 warning sign for Oak Valley Bancorp that investors should know about before committing capital to this stock. 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.