Peoples Bancorp's (NASDAQ:PEBO) Upcoming Dividend Will Be Larger Than Last Year's

Peoples Bancorp Inc. (NASDAQ:PEBO) has announced that it will be increasing its dividend on the 22nd of November to US$0.36. This takes the dividend yield to 4.5%, which shareholders will be pleased with.

See our latest analysis for Peoples Bancorp

Peoples Bancorp's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Peoples Bancorp was paying out 70% of earnings, but a comparatively small 45% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 34.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 86%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Peoples Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from US$0.40 in 2011 to the most recent annual payment of US$1.44. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Peoples Bancorp May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. However, Peoples Bancorp's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

The company has also been raising capital by issuing stock equal to 44% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Peoples Bancorp's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Peoples Bancorp that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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