Readers hoping to buy PCSB Financial Corporation (NASDAQ:PCSB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 15th of August, you won't be eligible to receive this dividend, when it is paid on the 30th of August.
PCSB Financial's next dividend payment will be US$0.04 per share, on the back of last year when the company paid a total of US$0.16 to shareholders. Based on the last year's worth of payments, PCSB Financial has a trailing yield of 0.8% on the current stock price of $19.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see PCSB Financial paying out a modest 26% of its earnings.
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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For that reason, it's encouraging to see PCSB Financial's earnings over the past year have risen 0.28322. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.
Unfortunately PCSB Financial has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Has PCSB Financial got what it takes to maintain its dividend payments? 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. PCSB Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about PCSB Financial's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
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