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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. Investors can purchase shares before the 5th of February in order to be eligible for this dividend, which will be paid on the 19th of February.
OceanFirst Financial's next dividend payment will be US$0.17 per share. Last year, in total, the company distributed US$0.68 to shareholders. Last year's total dividend payments show that OceanFirst Financial has a trailing yield of 3.7% on the current share price of $18.5. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for OceanFirst Financial
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. OceanFirst Financial paid out more than half (67%) of its earnings last year, which is a regular payout ratio for most companies.
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?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that OceanFirst Financial's earnings are down 3.6% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. OceanFirst Financial has delivered 3.5% dividend growth per year on average over the past 10 years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
Final Takeaway
Should investors buy OceanFirst Financial for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.