Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Oconee Federal Financial Corp. (NASDAQ:OFED) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Oconee Federal Financial's shares on or after the 4th of August, you won't be eligible to receive the dividend, when it is paid on the 19th of August.
The company's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Based on the last year's worth of payments, Oconee Federal Financial stock has a trailing yield of around 1.9% on the current share price of $21.55. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Oconee Federal Financial is paying out an acceptable 54% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Oconee Federal Financial's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Oconee Federal Financial's dividend payments are effectively flat on where they were 10 years ago.
The Bottom Line
Is Oconee Federal Financial an attractive dividend stock, or better left on the shelf? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. Oconee Federal Financial doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Although, if you're still interested in Oconee Federal Financial and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 1 warning sign with Oconee Federal Financial and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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