Yahoo Finance There's A Lot To Like About Orrstown Financial Services' (NASDAQ:ORRF) Upcoming US$0.20 Dividend
It looks like Orrstown Financial Services, Inc. (NASDAQ:ORRF) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Orrstown Financial Services' shares before the 6th of May in order to be eligible for the dividend, which will be paid on the 14th of May.
The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Last year's total dividend payments show that Orrstown Financial Services has a trailing yield of 3.0% on the current share price of US$26.34. If you buy this business for its dividend, you should have an idea of whether Orrstown Financial Services's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Orrstown Financial Services
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Orrstown Financial Services is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Orrstown Financial Services's earnings per share have risen 16% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Orrstown Financial Services has delivered 12% dividend growth per year on average over the past nine years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Has Orrstown Financial Services got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Orrstown Financial Services ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Orrstown Financial Services has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Orrstown Financial Services and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking 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.
