Should You Buy Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) For Its Upcoming Dividend?

Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Peoples Bancorp of North Carolina's shares before the 3rd of December in order to be eligible for the dividend, which will be paid on the 13th of December.

The company's upcoming dividend is US$0.19 a share, following on from the last 12 months, when the company distributed a total of US$0.92 per share to shareholders. Based on the last year's worth of payments, Peoples Bancorp of North Carolina stock has a trailing yield of around 2.9% on the current share price of US$31.44. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Peoples Bancorp of North Carolina

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Peoples Bancorp of North Carolina paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Peoples Bancorp of North Carolina paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Peoples Bancorp of North Carolina, with earnings per share up 6.5% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Peoples Bancorp of North Carolina has increased its dividend at approximately 20% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Peoples Bancorp of North Carolina worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Peoples Bancorp of North Carolina looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for Peoples Bancorp of North Carolina that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.