Prudential Bancorp, Inc. (NASDAQ:PBIP) Passed Our Checks, And It's About To Pay A US$0.07 Dividend

Prudential Bancorp, Inc. (NASDAQ:PBIP) is about to trade ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 4th of December will not receive this dividend, which will be paid on the 21st of December.

Prudential Bancorp's next dividend payment will be US$0.07 per share. Last year, in total, the company distributed US$0.28 to shareholders. Looking at the last 12 months of distributions, Prudential Bancorp has a trailing yield of approximately 2.0% on its current stock price of $13.68. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Prudential Bancorp can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Prudential Bancorp

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Prudential Bancorp is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Prudential Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Prudential Bancorp's earnings have been skyrocketing, up 33% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Prudential Bancorp has lifted its dividend by approximately 2.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is Prudential Bancorp worth buying for its dividend? Companies like Prudential Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Prudential Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Prudential Bancorp for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Prudential Bancorp you should be aware of.

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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This article by Simply Wall St is general in nature. 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.
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