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Shares of Preferred Bank (NASDAQ:PFBC) will begin trading ex-dividend in 2 days. To qualify for the dividend check of US$0.30 per share, investors must have owned the shares prior to 05 April 2019, which is the last day the company's management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Preferred Bank as an investment today? Below, I'm going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Preferred Bank pass our checks?
The company currently pays out 22% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 23% which, assuming the share price stays the same, leads to a dividend yield of 2.7%. Moreover, EPS should increase to $5.16.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. PFBC investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. However, income investors that value stability over growth may still find PFBC appealing.
Compared to its peers, Preferred Bank generates a yield of 2.6%, which is on the low-side for Banks stocks.
Considering the dividend attributes we analyzed above, Preferred Bank is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three relevant factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PFBC’s future growth? Take a look at our free research report of analyst consensus for PFBC’s outlook.
- Valuation: What is PFBC 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 PFBC is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.