Orrstown Financial Services, Inc. (NASDAQ:ORRF) has announced that it will be increasing its dividend from last year’s comparable payment on the 17th of February to $0.30. This makes the dividend yield about the same as the industry average at 3.3%.
We aren’t too impressed by dividend yields unless they can be sustained over time.
Orrstown Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company’s payout ratio shows 25%, which means that Orrstown Financial Services would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, EPS is forecast to rise by 4.7% over the next 3 years. Analysts estimate the future payout ratio will be 27% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Orrstown Financial Services
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.28 in 2016, and the most recent fiscal year payment was $1.20. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is good to see that there has been strong dividend growth, and that there haven’t been any cuts for a long time.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It’s encouraging to see that Orrstown Financial Services has been growing its earnings per share at 11% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for Orrstown Financial Services for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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Read More: Orrstown Financial Services (NASDAQ:ORRF) Is Paying Out A Larger Dividend
