The board of Old Point Financial Corporation (NASDAQ:OPOF) has announced that it will pay a dividend of $0.14 per share on the 28th of March. The dividend yield is 1.9% based on this payment, which is a little bit low compared to the other companies in the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Old Point Financial’s stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for Old Point Financial
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Old Point Financial 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 30%, which means that Old Point Financial would be able to pay its last dividend without pressure on the balance sheet.
Over the next year, EPS could expand by 4.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 30% by next year, which is in a pretty sustainable range.
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2015, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.56. This means that it has been growing its distributions at 8.8% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Investors could be attracted to the stock based on the quality of its payment history. However, Old Point Financial has only grown its earnings per share at 4.4% per annum over the past five years. While growth may be thin on the ground, Old Point Financial could always pay out a higher proportion of earnings to increase shareholder returns.
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
