Preferred Bank (NASDAQ:PFBC) Has Announced That It Will Be Increasing Its Dividend To $0.55

Preferred Bank's (NASDAQ:PFBC) dividend will be increasing from last year's payment of the same period to $0.55 on 21st of April. The payment will take the dividend yield to 4.1%, which is in line with the average for the industry.

View our latest analysis for Preferred Bank

Preferred Bank's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Preferred Bank has a good history of paying out dividends, with its current track record at 8 years. While past records don't necessarily translate into future results, the company's payout ratio of 21% also shows that Preferred Bank is able to comfortably pay dividends.

The next 3 years are set to see EPS grow by 5.1%. The future payout ratio could be 24% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Preferred Bank Is Still Building Its Track Record

Preferred Bank's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the annual payment back then was $0.40, compared to the most recent full-year payment of $2.20. This means that it has been growing its distributions at 24% per annum over that time. Preferred Bank has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Preferred Bank has impressed us by growing EPS at 25% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Preferred Bank's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 Preferred Bank 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.