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Could Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) be an attractive dividend share to own for the long haul? Investors are often drawn to a company for its dividend. If you are hoping to live on your dividends, it’s important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you’ll find our analysis useful.
A 2.0% yield is nothing to get excited about, but investors probably think the long payment history suggests Peoples Bancorp of North Carolina has some staying power. There are a few simple ways to reduce the risks of buying Peoples Bancorp of North Carolina for its dividend, and we’ll go through these below.
Explore this interactive chart for our latest analysis on Peoples Bancorp of North Carolina!
Payout ratios
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. So we need to be form a view on if a company’s dividend is sustainable, relative to its net profit after tax. Looking at the data, we can see that 23% of Peoples Bancorp of North Carolina’s profits were paid out as dividends in the last 12 months. Given the low payout ratio, it is hard to envision the dividend coming under threat, barring a catastrophe.
We update our data on Peoples Bancorp of North Carolina every 24 hours, so you can always get our latest analysis of its financial health, here.
Dividend Volatility
From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. For the purpose of this article, we only scrutinise the last decade of Peoples Bancorp of North Carolina’s dividend payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. During the past ten-year period, the first annual payment was US$0.25 in 2009, compared to US$0.56 last year. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time.
Dividend Growth Potential
While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend’s purchasing power over the long term. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it’s great to see Peoples Bancorp of North Carolina has grown its earnings per share at 19% per annum over the past five years. Earnings per share are growing at a solid clip, and the payout ratio is low. We think this is an ideal combination in a dividend stock.
Conclusion
When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. We’re glad to see Peoples Bancorp of North Carolina has a low payout ratio, as this suggests earnings are being reinvested in the business. We like that it has been delivering solid earnings growth and relatively consistent dividend payments.
Are management backing themselves to deliver performance? Check their shareholdings in Peoples Bancorp of North Carolina in our latest insider ownership analysis.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.