OceanFirst Financial Corp. (NASDAQ:OCFC) Looks Interesting, And It's About To Pay A Dividend
OceanFirst Financial Corp. (NASDAQ:OCFC) stock is about to trade ex-dividend in four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, OceanFirst Financial investors that purchase the stock on or after the 4th of November will not receive the dividend, which will be paid on the 18th of November.
The company's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.80 to shareholders. Looking at the last 12 months of distributions, OceanFirst Financial has a trailing yield of approximately 3.6% on its current stock price of $22.42. 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.
See our latest analysis for OceanFirst Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately OceanFirst Financial's payout ratio is modest, at just 39% of profit.
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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, OceanFirst Financial's earnings per share have been growing at 14% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, OceanFirst Financial has increased its dividend at approximately 5.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because OceanFirst Financial is keeping back more of its profits to grow the business.
The Bottom Line
From a dividend perspective, should investors buy or avoid OceanFirst Financial? Companies like OceanFirst Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, OceanFirst Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while OceanFirst Financial has an appealing dividend, it's worth knowing the risks involved with this stock. For example - OceanFirst Financial has 1 warning sign we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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