The board of Plumas Bancorp (NASDAQ:PLBC) has announced that the dividend on 17th of February will be increased to $0.30, which will be 11% higher than last year's payment of $0.27 which covered the same period. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

See our latest analysis for Plumas Bancorp

Plumas Bancorp's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Plumas Bancorp has a good history of paying out dividends, with its current track record at 8 years. While past data isn't a guarantee for the future, Plumas Bancorp's latest earnings report puts its payout ratio at 22%, showing that the company can pay out its dividends comfortably.

Looking forward, EPS is forecast to rise by 3.8% over the next 3 years. The future payout ratio could be 25% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Plumas Bancorp Is Still Building Its Track Record

Plumas Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the annual payment back then was $0.20, compared to the most recent full-year payment of $1.08. This works out to be a compound annual growth rate (CAGR) of approximately 23% 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. We are encouraged to see that Plumas Bancorp has grown earnings per share at 10% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Plumas 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Plumas Bancorp that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.