Premier Financial (NASDAQ:PFC) Is Increasing Its Dividend To US$0.28

Premier Financial Corp. (NASDAQ:PFC) will increase its dividend on the 19th of November to US$0.28. The announced payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

View our latest analysis for Premier Financial

Premier Financial's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Premier Financial was paying only paying out a fraction of earnings, but the payment was a massive 104% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 13.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is comfortable for the company to continue in the future.

Premier Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the first annual payment was US$0.10, compared to the most recent full-year payment of US$1.12. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year 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 Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Premier Financial has seen EPS rising for the last five years, at 18% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Premier Financial will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income 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 1 warning sign for Premier Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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