Understanding the Dividend Dynamics of Preferred Bank
Preferred Bank (PFBC, Financial) recently announced a dividend of $0.7 per share, payable on 2024-01-22, with the ex-dividend date set for 2024-01-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Preferred Bank's dividend performance and assess its sustainability.
What Does Preferred Bank Do?
Preferred Bank is a commercial bank located in California. Its products and services are divided into Personal Banking, Business Banking, and Commercial Banking which includes Checking accounts, Savings accounts, CDs, Loans and Credit, Electronic banking and Treasury Management. It provides personalized deposit services, real estate finance, commercial loans, and trade finance credit facilities to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals and high-net-worth individuals. The bank generates a majority of its revenue from Southern and Northern California and Flushing.
A Glimpse at Preferred Bank's Dividend History
Preferred Bank has maintained a consistent dividend payment record since 2014. Dividends are currently distributed on a quarterly basis. Preferred Bank has increased its dividend each year since 2014. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 10 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Preferred Bank's Dividend Yield and Growth
As of today, Preferred Bank currently has a 12-month trailing dividend yield of 3.00% and a 12-month forward dividend yield of 3.80%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Preferred Bank's annual dividend growth rate was 15.30%. Extended to a five-year horizon, this rate increased to 16.90% per year. Based on Preferred Bank's dividend yield and five-year growth rate, the 5-year yield on cost of Preferred Bank stock as of today is approximately 6.55%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Preferred Bank's dividend payout ratio is 0.21. Preferred Bank's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Preferred Bank's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Preferred Bank's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Preferred Bank's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Preferred Bank's revenue has increased by approximately 14.80% per year on average, a rate that outperforms approximately 82.11% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Preferred Bank's earnings increased by approximately 19.20% per year on average, a rate that outperforms approximately 74.94% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 19.80%, which outperforms approximately 81.62% of global competitors.
Next Steps
With a consistent history of dividend payments and growth, a prudent payout ratio, strong profitability, and robust growth metrics, Preferred Bank presents a compelling case for value investors seeking stable income streams. The bank's focus on maintaining a healthy balance between rewarding shareholders and reinvesting in its growth ensures its dividends are well-funded and sustainable. As the financial sector continues to evolve, Preferred Bank's strategic positioning and financial health may offer investors both stability and growth potential. Will Preferred Bank continue its streak of dividend growth, and what could this mean for long-term investors? GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
