PCB Bancorp's (NASDAQ:PCB) Dividend Will Be Increased To US$0.12

PCB Bancorp (NASDAQ:PCB) will increase its dividend on the 19th of November to US$0.12. Based on the announced payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

Check out our latest analysis for PCB Bancorp

PCB Bancorp's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, PCB Bancorp's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 15.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 29%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

PCB Bancorp Is Still Building Its Track Record

It is great to see that PCB Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 6 years was US$0.11 in 2015, and the most recent fiscal year payment was US$0.48. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see PCB Bancorp has been growing its earnings per share at 18% a year over the past five years. PCB Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like PCB Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for PCB Bancorp (of which 1 is a bit unpleasant!) you should know about. We have also put together a list of global stocks with a solid dividend.

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.

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