Oak Valley Bancorp's (NASDAQ:OVLY) Dividend Will Be Increased To $0.16

The board of Oak Valley Bancorp (NASDAQ:OVLY) has announced that it will be paying its dividend of $0.16 on the 10th of February, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.3%.

Check out our latest analysis for Oak Valley Bancorp

Oak Valley Bancorp's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Oak Valley Bancorp has a good history of paying out dividends, with its current track record at 9 years. Using data from its latest earnings report, Oak Valley Bancorp's payout ratio sits at 11%, an extremely comfortable number that shows that it can pay its dividend.

If the trend of the last few years continues, EPS will grow by 20.0% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 9.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Oak Valley Bancorp Doesn't Have A Long Payment History

It is great to see that Oak Valley Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Oak Valley Bancorp has impressed us by growing EPS at 20% 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.

Oak Valley Bancorp Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. 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. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Oak Valley Bancorp stock. Is Oak Valley Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.