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

By
Simply Wall St
Published
April 29, 2022
NasdaqGS:PEBO
Source: Shutterstock

Peoples Bancorp Inc. (NASDAQ:PEBO) has announced that it will be increasing its dividend on the 23rd of May to US$0.38, which will be 5.6% higher than last year. This takes the dividend yield from 5.1% to 5.2%, which shareholders will be pleased with.

Check out our latest analysis for Peoples Bancorp

Peoples Bancorp's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Peoples Bancorp's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 39.1% over the next year. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NasdaqGS:PEBO Historic Dividend April 29th 2022

Peoples Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$0.40, compared to the most recent full-year payment of US$1.44. This means that it has been growing its distributions at 14% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.2% per year. The company has been growing at a pretty soft 2.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We'd also point out that Peoples Bancorp has issued stock equal to 45% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Peoples Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Peoples Bancorp that investors should know about before committing capital to this stock. Is Peoples Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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