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 four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Peoples Bancorp of North Carolina's shares on or after the 3rd of December will not receive the dividend, which will be paid on the 15th of December.

The company's upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.96 per share to shareholders. Last year's total dividend payments show that Peoples Bancorp of North Carolina has a trailing yield of 2.9% on the current share price of US$32.62. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Fortunately Peoples Bancorp of North Carolina's payout ratio is modest, at just 25% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

View our latest analysis for Peoples Bancorp of North Carolina

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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Peoples Bancorp of North Carolina earnings per share are up 5.4% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Peoples Bancorp of North Carolina has lifted its dividend by approximately 16% 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

From a dividend perspective, should investors buy or avoid Peoples Bancorp of North Carolina? 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.

While it's tempting to invest in Peoples Bancorp of North Carolina for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Peoples Bancorp of North Carolina you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.