It looks like Ocean Bio-Chem, Inc. (NASDAQ:OBCI) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Ocean Bio-Chem investors that purchase the stock on or after the 3rd of December will not receive the dividend, which will be paid on the 21st of December.

The company's next dividend payment will be US$0.03 per share. Last year, in total, the company distributed US$0.12 to shareholders. Last year's total dividend payments show that Ocean Bio-Chem has a trailing yield of 1.2% on the current share price of $10. If you buy this business for its dividend, you should have an idea of whether Ocean Bio-Chem's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Ocean Bio-Chem

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ocean Bio-Chem paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Ocean Bio-Chem generated enough free cash flow to afford its dividend.

Click here to see how much of its profit Ocean Bio-Chem paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Ocean Bio-Chem has grown its earnings rapidly, up 78% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ocean Bio-Chem has delivered an average of 15% per year annual increase in its dividend, based on the past five years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Ocean Bio-Chem worth buying for its dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. All things considered, we are not particularly enthused about Ocean Bio-Chem from a dividend perspective.