Peoples Bancorp of North Carolina's (NASDAQ:PEBK) Dividend Will Be Increased To $0.20

Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of March to $0.20. This takes the annual payment to 3.4% of the current stock price, which is about average for the industry.

See our latest analysis for Peoples Bancorp of North Carolina

Peoples Bancorp of North Carolina's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Peoples Bancorp of North Carolina has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 25% also shows that Peoples Bancorp of North Carolina is able to comfortably pay dividends.

Looking forward, earnings per share could rise by 4.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was $0.146, compared to the most recent full-year payment of $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 4.9% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Peoples Bancorp of North Carolina has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Peoples Bancorp of North Carolina's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. As an example, we've identified 1 warning sign for Peoples Bancorp of North Carolina that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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