Read This Before Considering Penns Woods Bancorp, Inc. (NASDAQ:PWOD) For Its Upcoming 1.2% Dividend
It looks like Penns Woods Bancorp, Inc. (NASDAQ:PWOD) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 9th of September will not receive this dividend, which will be paid on the 24th of September.
Penns Woods Bancorp's upcoming dividend is US$0.47 a share, following on from the last 12 months, when the company distributed a total of US$1.88 per share to shareholders. Last year's total dividend payments show that Penns Woods Bancorp has a trailing yield of 4.6% on the current share price of $40.75. If you buy this business for its dividend, you should have an idea of whether Penns Woods Bancorp's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Penns Woods Bancorp
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Penns Woods Bancorp is paying out an acceptable 54% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Penns Woods Bancorp paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Penns Woods Bancorp's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Penns Woods Bancorp's dividend payments are effectively flat on where they were ten years ago.
To Sum It Up
Should investors buy Penns Woods Bancorp for the upcoming dividend? Penns Woods Bancorp's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
Keen to explore more data on Penns Woods Bancorp's financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
