Why OFG Bancorp (OFG) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
OFG Bancorp in Focus
OFG Bancorp (OFG) is headquartered in San Juan, and is in the Finance sector. The stock has seen a price change of 0.4% since the start of the year. The financial holding company is currently shelling out a dividend of $0.2 per share, with a dividend yield of 2.89%. This compares to the Banks - Northeast industry's yield of 2.52% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $0.80 is up 14.3% from last year. In the past five-year period, OFG Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 26.96%. 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 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, OFG expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $3.54 per share, which represents a year-over-year growth rate of 2.91%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, OFG is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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