Peoples Financial Services' (NASDAQ:PFIS) Dividend Will Be Increased To US$0.38

Peoples Financial Services Corp.'s (NASDAQ:PFIS) dividend will be increasing to US$0.38 on 15th of December. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

See our latest analysis for Peoples Financial Services

Peoples Financial Services' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Peoples Financial Services was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 14.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Peoples Financial Services Is Still Building Its Track Record

Peoples Financial Services' 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. The dividend has gone from US$1.24 in 2013 to the most recent annual payment of US$1.52. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

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. Peoples Financial Services has impressed us by growing EPS at 14% per year over the past five years. Peoples Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Peoples Financial Services 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Peoples Financial Services that investors should take into consideration. 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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