Is The Bank of Princeton (NASDAQ:BPRN) A Smart Choice For Dividend Investors? – Yahoo Finance

Is The Bank of Princeton (NASDAQ:BPRN) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. Yet sometimes, investors buy a popular dividend stock because of its yield, and then lose money if the company’s dividend doesn’t live up to expectations.

Some readers mightn’t know much about Bank of Princeton’s 1.9% dividend, as it has only been paying distributions for the last two years. While it may not look like much, if earnings are growing it could become quite interesting. Remember that the recent share price drop will make Bank of Princeton’s yield look higher, even though recent events might have impacted the company’s prospects. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we’ll go through this below.

Explore this interactive chart for our latest analysis on Bank of Princeton!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. So we need to form a view on if a company’s dividend is sustainable, relative to its net profit after tax. Looking at the data, we can see that 14% of Bank of Princeton’s profits were paid out as dividends in the last 12 months. We’d say its dividends are thoroughly covered by earnings.

We update our data on Bank of Princeton every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. The company has been paying a stable dividend for a few years now, but we’d like to see more evidence of consistency over a longer period. During the past two-year period, the first annual payment was US$0.12 in 2018, compared to US$0.40 last year. Dividends per share have grown at approximately 83% per year over this time.

The dividend has been growing pretty quickly, which could be enough to get us interested even though the dividend history is relatively short. Further research may be warranted.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Bank of Princeton’s EPS are effectively flat over the past five years. Over the long term, steady earnings per share is a risk as the value of the dividends can be reduced by inflation.

Conclusion

Dividend investors should always want to know if a) a company’s dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Firstly, we like that Bank of Princeton has a low and conservative payout ratio. Second, earnings per share have been in decline, and the dividend history is shorter than we’d like. In summary, we’re unenthused by Bank of Princeton as a dividend stock. It’s not that we think it is a bad company; it simply falls short of our criteria in some key areas.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We’ve spotted 3 warning signs for Bank of Princeton (of which 1 is concerning!) you should know about.