Oconee Federal Financial (NASDAQ:OFED) Is Due To Pay A Dividend Of US$0.10

Oconee Federal Financial Corp. (NASDAQ:OFED) has announced that it will pay a dividend of US$0.10 per share on the 19th of August. Including this payment, the dividend yield on the stock will be 1.8%, which is a modest boost for shareholders' returns.

View our latest analysis for Oconee Federal Financial

Oconee Federal Financial's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Oconee Federal Financial's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 3.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 56%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Oconee Federal 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. The most recent annual payment of US$0.40 is about the same as the first annual payment 10 years ago. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. It's not great to see that Oconee Federal Financial's earnings per share has fallen at approximately 3.5% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Oconee Federal 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. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Oconee Federal Financial that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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