The board of Old Point Financial Corporation (NASDAQ:OPOF) has announced that it will pay a dividend of US$0.12 per share on the 25th of June. Based on this payment, the dividend yield will be 2.0%, which is fairly typical for the industry.
See our latest analysis for Old Point Financial
Old Point Financial’s Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Old Point Financial is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
If the trend of the last few years continues, EPS will grow by 14.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.
NasdaqCM:OPOF Historic Dividend May 23rd 2021
Old Point Financial Has A Solid Track Record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. The dividend has gone from US$0.20 in 2011 to the most recent annual payment of US$0.48. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. Old Point Financial has impressed us by growing EPS at 15% per 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.
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Old Point Financial’s payments, as there could be some issues with sustaining them into the future. While Old Point Financial is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Old Point Financial in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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