Peoples Financial Services (NASDAQ:PFIS) Has Announced That It Will Be Increasing Its Dividend To US$0.38

Peoples Financial Services Corp. (NASDAQ:PFIS) has announced that it will be increasing its dividend on the 15th of September to US$0.38. This makes the dividend yield 3.3%, which is above the industry average.

View our latest analysis for Peoples Financial Services

Peoples Financial Services' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Peoples Financial Services was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 14.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Peoples Financial Services Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$1.24 in 2013 to the most recent annual payment of US$1.52. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Peoples Financial Services has been growing its earnings per share at 15% a 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.

We Really Like Peoples Financial Services' Dividend

Overall, a dividend increase is always good, and we think that Peoples Financial Services is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Peoples Financial Services that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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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.
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