Plumas Bancorp (NASDAQ:PLBC) Could Be A Buy For Its Upcoming Dividend

Plumas Bancorp (NASDAQ:PLBC) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Plumas Bancorp's shares on or after the 1st of August will not receive the dividend, which will be paid on the 15th of August.

The company's next dividend payment will be US$0.27 per share, on the back of last year when the company paid a total of US$1.08 to shareholders. Looking at the last 12 months of distributions, Plumas Bancorp has a trailing yield of approximately 2.5% on its current stock price of US$42.73. If you buy this business for its dividend, you should have an idea of whether Plumas Bancorp's dividend is reliable and sustainable. So we need to investigate whether Plumas Bancorp can afford its dividend, and if the dividend could grow.

View our latest analysis for Plumas Bancorp

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Plumas Bancorp is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Plumas Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Plumas Bancorp's earnings per share have risen 12% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Plumas Bancorp has delivered an average of 23% per year annual increase in its dividend, based on the past eight years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Plumas Bancorp got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Plumas Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Plumas Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Plumas Bancorp has 2 warning signs (and 1 which is significant) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com