Last update on 2024-06-27

Peoples Bancorp of North Carolina (PEBK) - Dividend Analysis (Final Score: 6/8)

Detailed dividend analysis of Peoples Bancorp of North Carolina (PEBK) reveals a final score of 6/8. Discover performance, stability, and future outlook.

Short Analysis - Dividend Score: 6

We're running Peoples Bancorp of North Carolina (PEBK) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Peoples Bancorp of North Carolina (PEBK) scored 6 out of 8 in the dividend stability assessment. Here’s a quick rundown of the results: (1) Their dividend yield is lower than the industry average, which indicates they may focus more on growth rather than paying high dividends. (2) Their average annual dividend growth rate is not consistently over 5% due to significant fluctuations. (3) Their payout ratio has been comfortably below 65%, which is good for retaining earnings and financial stability. (4) Dividend coverage by earnings is weak and fluctuating, suggesting potential risks in maintaining future dividends. (5) Dividend coverage by cashflow has been improving but still remains inconsistent. (6) Their dividend payments have not been stable, with notable drops during financial crises. (7) They have a long history of paying dividends—26 years. (8) Their commitment to stock repurchases is generally positive, although with some fluctuations. Overall, while PEBK shows some strengths, there are notable risks primarily around dividend coverage and stability.

Insights for Value Investors Seeking Stable Income

Based on the analysis, PEBK shows mixed signals for potential investors. Their long history of dividend payments and low payout ratio suggest financial stability, which is good. However, their below-average dividend yield and inconsistent dividend coverage and growth rate are red flags. If you are an investor looking for consistent, high dividends, PEBK may not currently be the best choice. However, if you value capital growth and potential long-term improvements, it may be worth considering. Further investigation into their financial plans and market conditions would be advisable before making an investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is important as it indicates the income generated as a percentage of the investment's cost. Higher yields might attract income-focused investors.

Peoples Bancorp of North Carolina (PEBK) has a dividend yield of 1.713% in 2023, which is lower than the industry average of 2.76%. Historically, PEBK’s dividend yield has shown significant fluctuations, peaking at 5.2527% during the 2009 financial crisis and dipping to a low of 0.8462% in 2013. Over the past two decades, PEBK's yield trends align with its stock price movements and dividend per share values. The dividend yield being lower than the industry average may indicate that investors are expecting less income in relation to the stock price compared to other companies in the industry. This trend could be viewed as negative from an investor's standpoint looking for higher income, but it could suggest that PEBK places more emphasis on capital growth or reinvesting earnings back into the company.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate over a long period, such as 20 years, gives investors an idea of the company's ability to consistently increase dividends. A rate higher than 5% is generally considered attractive.

Analyzing the Dividend Ratio from 2003 to 2023 for Peoples Bancorp of North Carolina (PEBK) shows that the dividend per share ratio has been highly volatile. Key observations include negative ratios in multiple years such as 2009 (-45.8337), 2010 (-69.2135), and 2023 (-39.0805), and some notably high positive spikes, e.g., 2012 (125) and 2007 (43.1603). The average dividend ratio over these years stands at 13.2979%, which indicates some level of overall growth. However, due to the sporadic nature of the ratio and the presence of significant negative values, the Dividend Growth Rate does not show a consistent higher-than-5% trend. Thus, while the average number might initially seem promising, the underlying volatility makes this trend less reliable and unattractive from a stability perspective.

Average annual Payout Ratio lower than 65% in the last 20 years?

Assessing whether the payout ratio is consistently below 65% is essential because it indicates the company's ability to maintain and potentially grow dividends.

The average payout ratio for Peoples Bancorp of North Carolina (PEBK) over the last 20 years stands at 25.48%, well below the 65% threshold. This is a positive indicator, suggesting that the company has had a prudent approach to distributing its profits as dividends. A low payout ratio indicates that PEBK retains a significant portion of its earnings for reinvestment or to cushion against future economic downturns. Notably, many years have payout ratios even lower, particularly 2011 with just 8.60% and some as recent as 2023 showing 0%, likely due to market conditions or strategic decisions to fortify the balance sheet, showing strong fiscal conservation. Overall, this trend is favorable for the stability and potential growth of future dividends.

Dividends Well Covered by Earnings?

Dividends being well-covered by earnings is crucial as it indicates the company's ability to sustain its dividend payouts in the long term without eating into its capital.

Evaluating Peoples Bancorp of North Carolina (PEBK)'s historical data, the coverage ratio of Dividends per Share (DPS) by Earnings per Share (EPS) fluctuates significantly over the given years. An ideal coverage ratio would generally be above 1, indicating that earnings sufficiently cover the dividends. However, PEBK's ratio consistently hovers below 0.5, showcasing poor coverage levels. In years like 2009 and 2010, the coverage was exceedingly low at 0.494 and 0.241, respectively, signaling potential risks to the dividend's sustainability. The most alarming is the 0 ratio in 2023, likely indicating either no earnings or dividends were declared. This overall trend suggests that PEBK's dividends are not well-supported by earnings, posing a bad outlook for long-term dividend integrity.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow is an essential metric to evaluate a company's ability to pay its dividends from its cash flow. It indicates operational efficiency and financial health.

To evaluate the trend, let's observe the Dividend covered by Cashflow ratio over the years for Peoples Bancorp of North Carolina (PEBK). Ideally, this ratio should be above 1 for complete coverage. However, we notice that the ratios often hover below 1—reaching even as low as 0.040 in 2013. Despite fluctuations, recent years (e.g., 2018-2023) display an improvement with values above 0.2 suggesting better dividend coverage. Such improvements indicate stronger operational cash flow, although there's room for further enhancement to ensure sustained dividend payments. These numbers raise concerns about consistency in completely covering dividends through free cash flow.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Based on the provided data, Peoples Bancorp of North Carolina (PEBK) has not maintained stable dividends over the past two decades. There are significant fluctuations in dividend payments, most notably the drastic decline from $0.4364 in 2008 to $0.2364 in 2009, which is a drop of approximately 46%. Further, in 2010, the dividend per share dropped to as low as $0.0727. However, the trend appears to recover post-2010, consistently increasing and peaking at $0.87 in 2022. The recovery in dividends with subsequent growth is a positive trend but the initial instability, especially during the financial crisis, might be a red flag for income-seeking investors who prioritize consistent dividend income.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years refers to a company's history of dividend payments over a long period. This criterion is crucial because it shows the company's commitment to returning profits to shareholders and indicates financial stability and profitability.

Peoples Bancorp of North Carolina (PEBK) has been paying dividends for 26 years, from 1998 to 2023. While the dividend payout fluctuated, it generally shows growth. Despite some dips, such as in 2009 and 2010 during the financial crisis and in 2023, the company demonstrated resilience by continuing to pay dividends. This long track record highlights PEBK's dedication to rewarding its shareholders, which is a positive trend for stability and attractiveness to investors.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluation of stock repurchasing trends in a company over two decades aids in understanding its commitment towards returning value to shareholders.

Peoples Bancorp of North Carolina (PEBK) has demonstrated somewhat consistent stock repurchases over the past 20 years. The number of shares outstanding has mostly seen a declining trend from 2005 onwards, indicating periods of buybacks. Although year-to-year figures reveal fluctuations, the overall reduction in the number of shares, combined with an average repurchase decline of -5.6775% per year, paints a generally positive picture. This suggests a commitment to enhancing shareholder value by reducing share count, which potentially increases Earnings Per Share (EPS). Any anomalies, such as the significant drop to zero shares in 2023, should be further investigated for context. Overall, this trend is good for investors looking at long-term value appreciation.