This is Why OFG Bancorp (OFG) is a Great Dividend Stock

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

OFG Bancorp in Focus

Based in San Juan, OFG Bancorp (OFG) is in the Finance sector, and so far this year, shares have seen a price change of -4.71%. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 2.37%. In comparison, the Banks - Northeast industry's yield is 2.46%, while the S&P 500's yield is 1.75%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.60 is up 50% from last year. Over the last 5 years, OFG Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 18.62%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. OFG's current payout ratio is 20%, meaning it paid out 20% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for OFG for this fiscal year. The Zacks Consensus Estimate for 2022 is $3.12 per share, with earnings expected to increase 11.03% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that OFG is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
OFG Bancorp (OFG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.