Oconee Federal Financial's (NASDAQ:OFED) Dividend Will Be $0.10

Oconee Federal Financial Corp. (NASDAQ:OFED) has announced that it will pay a dividend of $0.10 per share on the 25th of May. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

View our latest analysis for Oconee Federal Financial

Oconee Federal Financial's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Oconee Federal Financial has a long history of paying out a part of its earnings to shareholders. Based on Oconee Federal Financial's last earnings report, the payout ratio is at a decent 49%, meaning that the company is able to pay out its dividend with a bit of room to spare.

If the trend of the last few years continues, EPS will grow by 4.2% over the next 12 months. If the dividend continues on this path, the future payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Oconee Federal Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The most recent annual payment of $0.40 is about the same as the annual payment 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Oconee Federal Financial May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Oconee Federal Financial has only grown its earnings per share at 4.2% per annum over the past five years. Oconee Federal Financial is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Oconee Federal Financial Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Oconee Federal Financial stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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