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OceanFirst Financial Corp.'s (NASDAQ:OCFC) investors are due to receive a payment of $0.20 per share on 15th of November. The dividend yield will be 4.2% based on this payment which is still above the industry average.
View our latest analysis for OceanFirst Financial
OceanFirst Financial's Dividend Forecasted To Be Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained.
OceanFirst Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 46%, which means that OceanFirst Financial would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, EPS is forecast to rise by 19.6% over the next 3 years. Analysts estimate the future payout ratio will be 42% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
OceanFirst Financial Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $0.48 total annually to $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. OceanFirst Financial hasn't seen much change in its earnings per share over the last five years.
Our Thoughts On OceanFirst Financial's Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Is OceanFirst Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.