OFX Group Limited (ASX:OFX): 3 Days To Buy Before The Ex-Dividend Date

Important news for shareholders and potential investors in OFX Group Limited (ASX:OFX): The dividend payment of AU$0.026 per share will be distributed to shareholders on 14 December 2018, and the stock will begin trading ex-dividend at an earlier date, 27 November 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at OFX Group’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for OFX Group

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is it paying an annual yield above 75% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share risen in the past couple of years?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

ASX:OFX Historical Dividend Yield November 23rd 18

How does OFX Group fare?

OFX Group has a trailing twelve-month payout ratio of 66%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect OFX’s payout to remain around the same level at 71% of its earnings, which leads to a dividend yield of 3.6%. Moreover, EPS should increase to A$0.089.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider OFX Group as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, OFX Group has a yield of 3.2%, which is on the low-side for Diversified Financial stocks.

Next Steps:

If OFX Group is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three relevant factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for OFX’s future growth? Take a look at our free research report of analyst consensus for OFX’s outlook.

2. Valuation: What is OFX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OFX is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.