Why Preferred Bank (PFBC) is a Top Dividend Stock for Your Portfolio
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Preferred Bank (PFBC) have wha...
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Preferred Bank in Focus
Based in Los Angeles, Preferred Bank (PFBC) is in the Finance sector, and so far this year, shares have seen a price change of 25.48%. The independent commercial bank is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 2.4% compared to the Banks - West industry's yield of 2.05% and the S&P 500's yield of 1.37%.
In terms of dividend growth, the company's current annualized dividend of $1.52 is up 26.7% from last year. Over the last 5 years, Preferred Bank has increased its dividend 4 times on a year-over-year basis for an average annual increase of 18.45%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Preferred Bank's payout ratio is 28%, which means it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PFBC for this fiscal year. The Zacks Consensus Estimate for 2021 is $6.10 per share, representing a year-over-year earnings growth rate of 31.18%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFBC is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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