OFG Bancorp (OFG) is a Top Dividend Stock Right Now: Should You Buy?

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

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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

Headquartered in San Juan, OFG Bancorp (OFG) is a Finance stock that has seen a price change of 3.43% so far this year. The financial holding company is paying out a dividend of $0.15 per share at the moment, with a dividend yield of 2.18% compared to the Banks - Northeast industry's yield of 2.54% and the S&P 500's yield of 1.6%.

Looking at dividend growth, the company's current annualized dividend of $0.60 is up 50% 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 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. Right now, OFG's payout ratio is 20%, which means it paid out 20% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, OFG expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.30 per share, with earnings expected to increase 17.44% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious 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 is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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