Bank of Princeton (NASDAQ:BPRN) Is Paying Out A Larger Dividend Than Last Year

The Bank of Princeton (NASDAQ:BPRN) will increase its dividend on the 28th of February to US$0.25. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

View our latest analysis for Bank of Princeton

Bank of Princeton's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Bank of Princeton was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 8.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 25%, which is comfortable for the company to continue in the future.

Bank of Princeton Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The first annual payment during the last 3 years was US$0.12 in 2019, and the most recent fiscal year payment was US$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 103% a year over that time. Bank of Princeton has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Bank of Princeton Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Bank of Princeton has impressed us by growing EPS at 6.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Bank of Princeton's prospects of growing its dividend payments in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Bank of Princeton has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.