Readers hoping to buy The Bank of Princeton (NASDAQ:BPRN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 5th of February will not receive this dividend, which will be paid on the 28th of February.
Bank of Princeton’s next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Looking at the last 12 months of distributions, Bank of Princeton has a trailing yield of approximately 1.3% on its current stock price of $30.43. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Bank of Princeton has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Bank of Princeton is paying out just 7.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s not ideal to see Bank of Princeton’s earnings per share have been shrinking at 3.9% a year over the previous five years.
Unfortunately Bank of Princeton has only been paying a dividend for a year or so, so there’s not much of a history to draw insight from.
To Sum It Up
Is Bank of Princeton worth buying for its dividend? Bank of Princeton’s earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. 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.
Curious what other investors think of Bank of Princeton? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
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