Peoples Financial Services' (NASDAQ:PFIS) Shareholders Will Receive A Bigger Dividend Than Last Year

Peoples Financial Services Corp. (NASDAQ:PFIS) will increase its dividend from last year's comparable payment on the 15th of June to $0.41. The payment will take the dividend yield to 4.3%, which is in line with the average for the industry.

Check out our latest analysis for Peoples Financial Services

Peoples Financial Services' Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Peoples Financial Services has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Based on Peoples Financial Services' last earnings report, the payout ratio is at a decent 32%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 1.1% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 34%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Peoples Financial Services Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $1.24 in 2014 to the most recent total annual payment of $1.64. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Peoples Financial Services has impressed us by growing EPS at 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Peoples Financial Services' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Peoples Financial Services you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.