The board of Prudential Bancorp, Inc. (NASDAQ:PBIP) has announced that it will pay a dividend of US$0.07 per share on the 21st of March. This means the annual payment will be 1.9% of the current stock price, which is lower than the industry average.
Prudential Bancorp's Earnings Easily Cover the Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Prudential Bancorp's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
If the trend of the last few years continues, EPS will grow by 19.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was US$0.21, compared to the most recent full-year payment of US$0.28. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Prudential Bancorp has grown earnings per share at 19% per year over the past five years. Prudential Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Prudential Bancorp Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Prudential Bancorp (1 is significant!) that you should be aware of before investing. Is Prudential Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.