Oak Valley Bancorp (NASDAQ:OVLY) Will Pay A Larger Dividend Than Last Year At $0.30

The board of Oak Valley Bancorp (NASDAQ:OVLY) has announced that it will be paying its dividend of $0.30 on the 14th of February, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

Check out our latest analysis for Oak Valley Bancorp

Oak Valley Bancorp's Earnings Will 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.

Having distributed dividends for at least 10 years, Oak Valley Bancorp has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Oak Valley Bancorp's latest earnings report puts its payout ratio at 17%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share could rise by 14.4% 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 Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.10 in 2015, and the most recent fiscal year payment was $0.60. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Oak Valley Bancorp has impressed us by growing EPS at 14% per year over the past five years. Oak Valley Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Oak Valley Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Oak Valley Bancorp in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.