There's A Lot To Like About OceanFirst Financial's (NASDAQ:OCFC) Upcoming US$0.20 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see OceanFirst Financial Corp. (NASDAQ:OCFC) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase OceanFirst Financial's shares on or after the 2nd of February will not receive the dividend, which will be paid on the 16th of February.
The company's upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Based on the last year's worth of payments, OceanFirst Financial stock has a trailing yield of around 4.4% on the current share price of US$18.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether OceanFirst Financial can afford its dividend, and if the dividend could grow.
Check out our latest analysis for OceanFirst Financial
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. OceanFirst Financial paid out a comfortable 47% of its profit last year.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about OceanFirst Financial's flat earnings 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. OceanFirst Financial has delivered an average of 5.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
From a dividend perspective, should investors buy or avoid OceanFirst Financial? Earnings per share have been flat in recent years, although OceanFirst Financial reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, OceanFirst Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for OceanFirst Financial? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
