Preferred Bank's (NASDAQ:PFBC) Shareholders Will Receive A Bigger Dividend Than Last Year
Preferred Bank (NASDAQ:PFBC) will increase its dividend on the 20th of January to $0.80, which is 6.7% higher than last year's payment from the same period of $0.75. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.
Preferred Bank's Payment Expected To Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.
Preferred Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 30%, which means that Preferred Bank would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 12.1%. Analysts forecast the future payout ratio could be 29% over the same time horizon, which is a number we think the company can maintain.
See our latest analysis for Preferred Bank
Preferred Bank Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.48 in 2015, and the most recent fiscal year payment was $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Preferred Bank has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Preferred Bank's prospects of growing its dividend payments in the future.
We Really Like Preferred Bank's Dividend
Overall, a dividend increase is always good, and we think that Preferred Bank is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Preferred Bank that investors should know about before committing capital to this 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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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.