Stock Analysis

Preferred Bank (NASDAQ:PFBC) Looks Interesting, And It's About To Pay A Dividend

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NasdaqGS:PFBC
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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Preferred Bank (NASDAQ:PFBC) is about to go ex-dividend in just four days. You will need to purchase shares before the 6th of January to receive the dividend, which will be paid on the 21st of January.

Preferred Bank's next dividend payment will be US$0.30 per share. Last year, in total, the company distributed US$1.20 to shareholders. Based on the last year's worth of payments, Preferred Bank stock has a trailing yield of around 2.4% on the current share price of $50.47. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Preferred Bank

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Preferred Bank paid out a comfortable 26% of its profit last year.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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NasdaqGS:PFBC Historic Dividend January 1st 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Preferred Bank's earnings have been skyrocketing, up 20% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, Preferred Bank has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Should investors buy Preferred Bank for the upcoming dividend? Companies like Preferred Bank that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Preferred Bank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for Preferred Bank that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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