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

Oconee Federal Financial Corp. (NASDAQ:OFED) will pay a dividend of $0.10 on the 25th of August. This means the annual payment will be 1.9% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Oconee Federal Financial

Oconee Federal Financial's Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

Oconee Federal Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 57%, which means that Oconee Federal Financial would be able to pay its last dividend without pressure on the balance sheet.

Unless the company can turn things around, EPS could fall by 6.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 61%, which is definitely feasible to continue.

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. There hasn't been much of a change in the dividend over the last 10 years. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. In the last five years, Oconee Federal Financial's earnings per share has shrunk at approximately 6.2% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, we think Oconee Federal Financial is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Oconee Federal Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.