Is It Smart To Buy OceanFirst Financial Corp. (NASDAQ:OCFC) Before It Goes Ex-Dividend?

OceanFirst Financial Corp. (NASDAQ:OCFC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Thus, you can purchase OceanFirst Financial's shares before the 3rd of May in order to receive the dividend, which the company will pay on the 17th of May.

The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Last year's total dividend payments show that OceanFirst Financial has a trailing yield of 5.2% on the current share price of US$15.37. 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! As a result, readers should always check whether OceanFirst Financial has been able to grow its dividends, or if the dividend might be cut.

See 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. That's why it's good to see OceanFirst Financial paying out a modest 47% of its earnings.

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.

historic-dividend

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see OceanFirst Financial earnings per share are up 2.2% per annum over the last 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 an average of 5.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has OceanFirst Financial got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, OceanFirst Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in OceanFirst Financial for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for OceanFirst Financial that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.