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The board of Parke Bancorp, Inc. (NASDAQ:PKBK) has announced that it will pay a dividend on the 20th of July, with investors receiving US$0.16 per share. The dividend yield will be 3.2% based on this payment which is still above the industry average.
Parke Bancorp's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Parke Bancorp was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share could rise by 19.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.
Parke Bancorp Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the dividend has gone from US$0.14 to US$0.64. This means that it has been growing its distributions at 25% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Parke Bancorp has grown earnings per share at 19% per year over the past five years. Parke Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Parke Bancorp Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Parke Bancorp that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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. 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.
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