Orrstown Financial Services (NASDAQ:ORRF) will pay a dividend of $0.19

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Orrstown Financial Services, Inc. (NASDAQ:ORRF) announced that it will pay a dividend of $0.19 per share on August 8. Based on this payout, the dividend yield will be 2.9%, which is fairly typical for the industry.

Profits from Orrstown Financial Services will easily cover distributions

We’re not too impressed with dividend yields unless they can be sustained over time.

Orrstown Financial Services has a good history of paying dividends, with its current balance sheet of 7 years. According to Orrstown Financial Services’ latest earnings report, the payout ratio is 26%, meaning the company is able to pay out its dividend with some wiggle room.

Over the next year, EPS is expected to increase by 0.6%. Assuming the dividend continues on recent trends, we think the future payout ratio could be 30% by next year, which is in a fairly sustainable range.

NasdaqCM: ORRF Historic Dividend July 25, 2022

Orrstown Financial Services does not have a long payment history

Even though the company has been paying out a consistent dividend for some time, we’d like to see a few more years before we feel comfortable counting on it. The annual payment over the past 7 years was $0.28 in 2015, and the most recent year payment was $0.76. This means that it increased its distributions by 15% per year during this period. We’re not too excited about the relatively short history of dividend payouts, but the dividend is growing at a nice pace and we could take a closer look.

The dividend should increase

Some investors will be eager to buy some of the company’s stock based on its dividend history. We are encouraged to see that Orrstown Financial Services has increased its earnings per share by 22% per year over the past five years. Earnings per share are growing at a steady pace and the payout ratio is low, which we believe is an ideal combination in a dividend-paying stock, as the company can quite easily increase the dividend in the future.

We really like the Orrstown Financial Services dividend

Overall, we want the dividend to remain constant and believe Orrstown Financial Services may even increase payouts in the future. Distributions are quite easily covered by earnings, which are also converted into cash flow. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing capital in a stock. For example, we have identified 2 warning signs for Orrstown Financial Services (1 doesn’t really suit us!) which you should be aware of before investing. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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