This is Why Peoples Financial Services (PFIS) is a Great Dividend Stock

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

Peoples Financial Services in Focus

Headquartered in Scranton, Peoples Financial Services (PFIS) is a Finance stock that has seen a price change of -3% so far this year. Currently paying a dividend of $0.39 per share, the company has a dividend yield of 3.05%. In comparison, the Banks - Northeast industry's yield is 2.33%, while the S&P 500's yield is 1.58%.

In terms of dividend growth, the company's current annualized dividend of $1.56 is up 4% from last year. Peoples Financial Services has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.58%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Peoples Financial Services's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for PFIS for this fiscal year. The Zacks Consensus Estimate for 2022 is $4.72 per share, with earnings expected to increase 0.43% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFIS 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).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Peoples Financial Services Corp. (PFIS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.