Princeton Bancorp, Inc.'s (NASDAQ:BPRN) periodic dividend will be increasing on the 3rd of March to $0.30, with investors receiving 20% more than last year's $0.25. The payment will take the dividend yield to 3.0%, which is in line with the average for the industry.
Princeton Bancorp's Earnings Will Easily Cover The Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.
Princeton Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. While it has a shorter history of paying out dividends, Princeton Bancorp's payout ratio of 23% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
The next 3 years are set to see EPS grow by 1.3%. Analysts forecast the future payout ratio could be 24% over the same time horizon, which is a number we think the company can maintain.
Princeton Bancorp Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2019, the dividend has gone from $0.12 total annually to $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 70% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Princeton Bancorp has seen EPS rising for the last five years, at 16% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Princeton Bancorp Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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 identified 2 warning signs for Princeton Bancorp (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Princeton Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.
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