Peoples Bancorp of North Carolina's (NASDAQ:PEBK) Upcoming Dividend Will Be Larger Than Last Year's

Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) will increase its dividend from last year's comparable payment on the 15th of June to $0.19. This will take the dividend yield to an attractive 5.2%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Peoples Bancorp of North Carolina's stock price has reduced by 47% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Peoples Bancorp of North Carolina

Peoples Bancorp of North Carolina's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

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. Based on Peoples Bancorp of North Carolina's last earnings report, the payout ratio is at a decent 25%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share could rise by 8.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was $0.0727, compared to the most recent full-year payment of $0.91. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Peoples Bancorp of North Carolina has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Peoples Bancorp of North Carolina's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Peoples Bancorp of North Carolina has impressed us by growing EPS at 8.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Peoples Bancorp of North Carolina's prospects of growing its dividend payments in the future.

We Really Like Peoples Bancorp of North Carolina's Dividend

Overall, a dividend increase is always good, and we think that Peoples Bancorp of North Carolina is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs 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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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.