Pathfinder Bancorp, Inc. (NASDAQ:PBHC) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 17th of October to receive the dividend, which will be paid on the 8th of November.
Pathfinder Bancorp's next dividend payment will be US$0.06 per share. Last year, in total, the company distributed US$0.2 to shareholders. Calculating the last year's worth of payments shows that Pathfinder Bancorp has a trailing yield of 1.8% on the current share price of $13. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Pathfinder Bancorp can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Pathfinder Bancorp paid out a comfortable 33% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Pathfinder Bancorp, with earnings per share up 4.5% on average over the last five years.
We'd also point out that Pathfinder Bancorp issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Pathfinder Bancorp's dividend payments are broadly unchanged compared to where they were ten years ago.
To Sum It Up
Is Pathfinder Bancorp worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Pathfinder Bancorp more closely.
Want to learn more about Pathfinder Bancorp's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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