OFG Bancorp's (NYSE:OFG) Upcoming Dividend Will Be Larger Than Last Year's

The board of OFG Bancorp (NYSE:OFG) has announced that it will be paying its dividend of $0.22 on the 17th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.

View our latest analysis for OFG Bancorp

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

We aren't too impressed by dividend yields unless they can be sustained over time.

OFG Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, OFG Bancorp's payout ratio sits at 21%, an extremely comfortable number that shows that it can pay its dividend.

Over the next year, EPS is forecast to fall by 3.3%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 25%, which would be comfortable for the company to continue in the future.

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 $0.24 in 2013, and the most recent fiscal year payment was $0.88. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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 seen EPS rising for the last five years, at 32% per annum. 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for OFG Bancorp (of which 1 can't be ignored!) 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.