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

Peoples Financial Services Corp. (NASDAQ:PFIS) will increase its dividend from last year's comparable payment on the 15th of March to $0.41. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.

Check out 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.

Peoples Financial Services has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 30%shows that Peoples Financial Services would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 9.1%. If the dividend continues on this path, the future payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Peoples Financial Services Is Still Building Its Track Record

It is great to see that Peoples Financial Services has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $1.24 in 2014 to the most recent total annual payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% 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

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 seen EPS rising for the last five years, at 16% 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.

Peoples Financial Services Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. 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.