Peoples Financial Services (NASDAQ:PFIS) Is Paying Out A Larger Dividend Than Last Year

Peoples Financial Services Corp.'s (NASDAQ:PFIS) dividend will be increasing to US$0.38 on 15th of September. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Peoples Financial Services

Peoples Financial Services' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Peoples Financial Services' earnings easily 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 on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Peoples Financial Services Doesn't Have A Long Payment History

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 first annual payment during the last 7 years was US$1.24 in 2014, and the most recent fiscal year payment was US$1.52. This works out to be a compound annual growth rate (CAGR) of approximately 3.0% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Peoples Financial Services has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Peoples Financial Services' prospects of growing its dividend payments in the future.

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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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