PCSB Financial (NASDAQ:PCSB) Will Pay A Larger Dividend Than Last Year At US$0.06

The board of PCSB Financial Corporation (NASDAQ:PCSB) has announced that it will be increasing its dividend on the 26th of November to US$0.06. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for PCSB Financial

PCSB Financial's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, PCSB Financial was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 2.0%. If the dividend continues along recent trends, we estimate the payout ratio could be 26%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

PCSB Financial Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2017, the first annual payment was US$0.12, compared to the most recent full-year payment of US$0.24. This implies that the company grew its distributions at a yearly rate of about 19% 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. PCSB Financial has seen EPS rising for the last three years, at 29% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like PCSB Financial's Dividend

Overall, a dividend increase is always good, and we think that PCSB Financial is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on PCSB Financial management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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