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Oconee Federal Financial Corp. (NASDAQ:OFED) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Oconee Federal Financial's shares before the 4th of August in order to be eligible for the dividend, which will be paid on the 19th of August.
The company's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Based on the last year's worth of payments, Oconee Federal Financial stock has a trailing yield of around 1.9% on the current share price of $21.55. If you buy this business for its dividend, you should have an idea of whether Oconee Federal Financial's dividend is reliable and sustainable. So we need to investigate whether Oconee Federal Financial can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Oconee Federal Financial paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Oconee Federal Financial's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Oconee Federal Financial's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
Is Oconee Federal Financial an attractive dividend stock, or better left on the shelf? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. Oconee Federal Financial doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Although, if you're still interested in Oconee Federal Financial and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 1 warning sign for Oconee Federal Financial you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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