Peoples Financial Services' (NASDAQ:PFIS) Upcoming Dividend Will Be Larger Than Last Year's

Peoples Financial Services Corp. (NASDAQ:PFIS) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of September to $0.40. This makes the dividend yield about the same as the industry average at 3.0%.

See our latest analysis for Peoples Financial Services

Peoples Financial Services' Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Peoples Financial Services has a good history of paying out dividends, with its current track record at 8 years. Using data from its latest earnings report, Peoples Financial Services' payout ratio sits at 25%, an extremely comfortable number that shows that it can pay its dividend.

Over the next year, EPS is forecast to fall by 2.8%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 27%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

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. Since 2014, the dividend has gone from $1.24 total annually to $1.56. This means that it has been growing its distributions at 2.9% per annum over that time. Peoples Financial Services hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

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 impressed us by growing EPS at 18% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Case in point: We've spotted 2 warning signs for Peoples Financial Services (of which 1 shouldn't be ignored!) you should know about. 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.