Preferred Bank's (NASDAQ:PFBC) dividend will be increasing from last year's payment of the same period to $0.55 on 21st of April. This takes the annual payment to 4.1% of the current stock price, which is about average for the industry.
See our latest analysis for Preferred Bank
Preferred Bank's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Having paid out dividends for 8 years, Preferred Bank has a good history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 21% also shows that Preferred Bank is able to comfortably pay dividends.
Looking forward, EPS is forecast to rise by 5.1% over the next 3 years. The future payout ratio could be 24% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Preferred Bank Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.40 in 2015 to the most recent total annual payment of $2.20. This means that it has been growing its distributions at 24% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Preferred Bank has impressed us by growing EPS at 25% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like Preferred Bank's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Preferred Bank that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.