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Is It Smart To Buy Ottawa Bancorp, Inc. (NASDAQ:OTTW) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ottawa Bancorp, Inc. (NASDAQ:OTTW) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 3rd of March to receive the dividend, which will be paid on the 18th of March.

The upcoming dividend for Ottawa Bancorp is US$0.43 per share, increased from last year's total dividends per share of US$0.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Ottawa Bancorp has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Ottawa Bancorp

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Ottawa Bancorp paying out a modest 39% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Ottawa Bancorp paid out over the last 12 months.

NasdaqCM:OTTW Historical Dividend Yield, February 27th 2020
NasdaqCM:OTTW Historical Dividend Yield, February 27th 2020

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Ottawa Bancorp earnings per share are up 10.0% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ottawa Bancorp has delivered an average of 4.8% per year annual increase in its dividend, based on the past ten years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Ottawa Bancorp for the upcoming dividend? Ottawa Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Ottawa Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Keen to explore more data on Ottawa Bancorp's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.