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Readers hoping to buy Peoples Financial Services Corp. (NASDAQ:PFIS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 28th of August in order to receive the dividend, which the company will pay on the 15th of September.
Peoples Financial Services's next dividend payment will be US$0.36 per share, on the back of last year when the company paid a total of US$1.44 to shareholders. Last year's total dividend payments show that Peoples Financial Services has a trailing yield of 3.9% on the current share price of $36.92. If you buy this business for its dividend, you should have an idea of whether Peoples Financial Services's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Peoples Financial Services's payout ratio is modest, at just 42% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 Peoples Financial Services, with earnings per share up 7.7% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Peoples Financial Services has delivered an average of 2.2% per year annual increase in its dividend, based on the past seven years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is Peoples Financial Services worth buying for its dividend? Peoples Financial Services has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Peoples Financial Services more closely.
In light of that, while Peoples Financial Services has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Peoples Financial Services has 1 warning sign we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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