Peoples Financial Services Corp. (NASDAQ:PFIS) stock is about to trade ex-dividend in three days. Investors can purchase shares before the 27th of November in order to be eligible for this dividend, which will be paid on the 15th of December.
Peoples Financial Services's upcoming dividend is US$0.36 a share, following on from the last 12 months, when the company distributed a total of US$1.44 per share to shareholders. Based on the last year's worth of payments, Peoples Financial Services stock has a trailing yield of around 3.7% on the current share price of $39.14. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Peoples Financial Services paid out a comfortable 40% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Peoples Financial Services, with earnings per share up 8.8% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, seven years ago, Peoples Financial Services has lifted its dividend by approximately 2.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy Peoples Financial Services for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Peoples Financial Services more closely.
While it's tempting to invest in Peoples Financial Services for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Peoples Financial Services and you should be aware of it before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you’re looking to trade Peoples Financial Services, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.