Provident Bancorp, Inc. (NASDAQ:PVBC) will pay a dividend of $0.04 on the 26th of August. This payment means the dividend yield will be 1.0%, which is below the average for the industry.
Provident Bancorp's Payment Expected To Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end.
Provident Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 2-year history of distributing earnings. Despite the company's shorter dividend history however, calculating for its payout ratio of 13% shows that Provident Bancorp is able to comfortably pay dividends.
The next year is set to see EPS grow by 20.7%. If the dividend continues along recent trends, we estimate the future payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.
Provident Bancorp Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 2 years was $0.12 in 2020, and the most recent fiscal year payment was $0.16. This means that it has been growing its distributions at 15% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
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. Provident Bancorp has impressed us by growing EPS at 25% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We should note that Provident Bancorp has issued stock equal to 19% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Provident Bancorp Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Provident Bancorp that investors should know about before committing capital to this stock. Is Provident Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.
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