OFG Bancorp's (NYSE:OFG) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of OFG Bancorp (NYSE:OFG) has announced that it will be increasing its dividend by 20% on the 15th of April to $0.30, up from last year's comparable payment of $0.25. This takes the annual payment to 2.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for OFG Bancorp

OFG Bancorp's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

OFG Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 24% also shows that OFG Bancorp is able to comfortably pay dividends.

The next 3 years are set to see EPS grow by 5.5%. 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 annual payment during the last 10 years was $0.32 in 2015, and the most recent fiscal year payment was $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. OFG Bancorp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. OFG Bancorp has impressed us by growing EPS at 36% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like OFG Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for OFG Bancorp (of which 1 is a bit concerning!) you should know about. Is OFG 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.