Readers hoping to buy OceanFirst Financial Corp. (NASDAQ:OCFC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 31st of July will not receive the dividend, which will be paid on the 14th of August.
OceanFirst Financial’s upcoming dividend is US$0.17 a share, following on from the last 12 months, when the company distributed a total of US$0.68 per share to shareholders. Looking at the last 12 months of distributions, OceanFirst Financial has a trailing yield of approximately 4.1% on its current stock price of $16.42. If you buy this business for its dividend, you should have an idea of whether OceanFirst Financial’s dividend is reliable and sustainable. So we need to investigate whether OceanFirst Financial can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That’s why it’s good to see OceanFirst Financial paying out a modest 45% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it’s a relief to see OceanFirst Financial earnings per share are up 4.9% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. OceanFirst Financial has seen its dividend decline 1.6% per annum on average over the past 10 years, which is not great to see.
Is OceanFirst Financial an attractive dividend stock, or better left on the shelf? OceanFirst Financial 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. We think this is a pretty attractive combination, and would be interested in investigating OceanFirst Financial more closely.
On that note, you’ll want to research what risks OceanFirst Financial is facing. Our analysis shows 2 warning signs for OceanFirst Financial and you should be aware of them before buying any shares.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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