U.S. Markets open in 5 hrs 56 mins
  • S&P Futures

    4,578.50
    +2.75 (+0.06%)
     
  • Dow Futures

    34,700.00
    +78.00 (+0.23%)
     
  • Nasdaq Futures

    15,967.75
    -20.75 (-0.13%)
     
  • Russell 2000 Futures

    2,207.20
    +2.00 (+0.09%)
     
  • Crude Oil

    68.45
    +1.95 (+2.93%)
     
  • Gold

    1,769.20
    +6.50 (+0.37%)
     
  • Silver

    22.34
    +0.02 (+0.11%)
     
  • EUR/USD

    1.1302
    -0.0004 (-0.0339%)
     
  • 10-Yr Bond

    1.4480
    0.0000 (0.00%)
     
  • Vix

    26.96
    -4.16 (-13.37%)
     
  • GBP/USD

    1.3272
    -0.0030 (-0.2230%)
     
  • USD/JPY

    113.4000
    +0.1910 (+0.1687%)
     
  • BTC-USD

    56,575.21
    -414.30 (-0.73%)
     
  • CMC Crypto 200

    1,443.89
    +5.01 (+0.35%)
     
  • FTSE 100

    7,172.27
    +43.06 (+0.60%)
     
  • Nikkei 225

    28,029.57
    +276.20 (+1.00%)
     

Preferred Bank (NASDAQ:PFBC) Looks Interesting, And It's About To Pay A Dividend

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Preferred Bank (NASDAQ:PFBC) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Preferred Bank's shares before the 6th of October in order to receive the dividend, which the company will pay on the 21st of October.

The company's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$1.52 per share to shareholders. Looking at the last 12 months of distributions, Preferred Bank has a trailing yield of approximately 2.3% on its current stock price of $66.68. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Preferred Bank has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Preferred Bank

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Preferred Bank paid out a comfortable 25% of its profit last year.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Preferred Bank's earnings per share have risen 20% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Preferred Bank has delivered 21% dividend growth per year on average over the past seven years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Preferred Bank worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Preferred Bank looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks Preferred Bank is facing. In terms of investment risks, we've identified 2 warning signs with Preferred Bank and understanding them should be part of your investment process.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.