Don't Buy Penns Woods Bancorp, Inc. (NASDAQ:PWOD) For Its Next Dividend Without Doing These Checks

It looks like Penns Woods Bancorp, Inc. (NASDAQ:PWOD) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 7th of December, you won't be eligible to receive this dividend, when it is paid on the 22nd of December.

Penns Woods Bancorp's next dividend payment will be US$0.32 per share, and in the last 12 months, the company paid a total of US$1.28 per share. Last year's total dividend payments show that Penns Woods Bancorp has a trailing yield of 5.1% on the current share price of $25.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Penns Woods Bancorp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Penns Woods Bancorp paid out more than half (64%) of its earnings last year, which is a regular payout ratio for most companies.

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 Penns Woods Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Penns Woods Bancorp's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Penns Woods Bancorp dividends are largely the same as they were 10 years ago.

Final Takeaway

Is Penns Woods Bancorp an attractive dividend stock, or better left on the shelf? Penns Woods Bancorp's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Penns Woods Bancorp as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 1 warning sign for Penns Woods Bancorp that you should be aware of before investing in their shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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