OFG Bancorp (NYSE:OFG) Will Pay A Larger Dividend Than Last Year At $0.22

OFG Bancorp (NYSE:OFG) will increase its dividend from last year's comparable payment on the 17th of April to $0.22. This makes the dividend yield about the same as the industry average at 2.9%.

View our latest analysis for OFG Bancorp

OFG Bancorp's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, OFG Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, OFG Bancorp's payout ratio sits at 20%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 6.9%. The future payout ratio could be 24% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.24 in 2013 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 13% per annum 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. OFG Bancorp has impressed us by growing EPS at 32% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

OFG Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that OFG Bancorp is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, OFG Bancorp has 3 warning signs (and 1 which is concerning) we think you should know about. 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.