Oak Valley Bancorp's (NASDAQ:OVLY) Upcoming Dividend Will Be Larger Than Last Year's

Oak Valley Bancorp (NASDAQ:OVLY) will increase its dividend from last year's comparable payment on the 11th of August to $0.16. Even though the dividend went up, the yield is still quite low at only 1.1%.

View our latest analysis for Oak Valley Bancorp

Oak Valley Bancorp's Dividend Forecasted To Be Well Covered By Earnings

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 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 7.7%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share could rise by 28.7% 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 6.4% 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. The dividend has gone from an annual total of $0.10 in 2014 to the most recent total annual payment of $0.32. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Oak Valley Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Oak Valley Bancorp has been growing its earnings per share at 29% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

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. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Oak Valley Bancorp management tenure, salary, and performance. 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.