OFG Bancorp (NYSE:OFG) Is Increasing Its Dividend To $0.25

OFG Bancorp (NYSE:OFG) has announced that it will be increasing its periodic dividend on the 15th of April to $0.25, which will be 14% higher than last year's comparable payment amount of $0.22. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

Check out our latest analysis for OFG Bancorp

OFG Bancorp's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

OFG Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, OFG Bancorp's latest earnings report puts its payout ratio at 23%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to expand by 3.7%. Analysts forecast the future payout ratio could be 23% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from $0.24 total annually to $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that OFG Bancorp has been growing its earnings per share at 19% a 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.

OFG 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for OFG Bancorp that investors should take into consideration. Is OFG Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.