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The board of PCB Bancorp (NASDAQ:PCB) has announced that it will pay a dividend on the 15th of November, with investors receiving $0.18 per share. This means the dividend yield will be fairly typical at 3.8%.
Check out our latest analysis for PCB Bancorp
PCB Bancorp's Earnings Will Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
PCB Bancorp has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but PCB Bancorp's payout ratio of 43% is a good sign for current shareholders as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 55.3%. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.
PCB Bancorp Doesn't Have A Long Payment History
PCB Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.109 in 2015 to the most recent total annual payment of $0.72. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. However, PCB Bancorp's EPS was effectively flat over the past five years, which could stop the company from paying more every year. PCB Bancorp is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
In Summary
Overall, a consistent dividend is a good thing, and we think that PCB Bancorp has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for PCB Bancorp that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.