Peoples Financial Services (NASDAQ:PFIS) Is Due To Pay A Dividend Of $0.41

The board of Peoples Financial Services Corp. (NASDAQ:PFIS) has announced that it will pay a dividend of $0.41 per share on the 15th of December. This means that the annual payment will be 4.2% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Peoples Financial Services

Peoples Financial Services' Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, Peoples Financial Services has a long history of paying out a part of its earnings to shareholders. Based on Peoples Financial Services' last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to fall by 59.5%. If recent patterns in the dividend continue, we could see the future payout ratio reaching 88% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Peoples Financial Services 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. The dividend has gone from an annual total of $1.24 in 2013 to the most recent total annual payment of $1.64. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Peoples Financial Services has grown earnings per share at 10% 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.

Our Thoughts On Peoples Financial Services' Dividend

Overall, a consistent dividend is a good thing, and we think that Peoples Financial Services has the ability to continue this into the future. The company is paying out quite a high portion of earnings, but with those earnings growing quickly, this might resolve itself eventually. If earnings do fall over the next 12 months, the dividend could come under pressure, but we don't think it should cause too much of a problem in the long term. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 example, we've picked out 1 warning sign for Peoples Financial Services that investors should know about before committing capital to this stock. Is Peoples Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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