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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, OceanFirst Financial Corp. (NASDAQ:OCFC) has paid dividends to shareholders, and these days it yields 2.8%. Does OceanFirst Financial tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for OceanFirst Financial
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does OceanFirst Financial fare?
The company currently pays out 42% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 38% which, assuming the share price stays the same, leads to a dividend yield of around 3.5%. Moreover, EPS should increase to $2.11.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from OceanFirst Financial have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, OceanFirst Financial has a yield of 2.8%, which is on the low-side for Mortgage stocks.
Next Steps:
If OceanFirst Financial is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for OCFC’s future growth? Take a look at our free research report of analyst consensus for OCFC’s outlook.
- Valuation: What is OCFC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OCFC is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.