OceanFirst Financial Corp. (NASDAQ:OCFC) will pay a dividend of $0.20 on the 16th of May. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

OceanFirst Financial's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

OceanFirst Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on OceanFirst Financial's last earnings report, the payout ratio is at a decent 52%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 14.8%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 48% by next year, which is in a pretty sustainable range.

View our latest analysis for OceanFirst Financial

OceanFirst Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.48 in 2015 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 5.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Unfortunately, OceanFirst Financial's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, we think OceanFirst 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. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 7 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is OceanFirst Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.