Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) has announced that it will pay a dividend of $0.33 per share on the 12th of August. This makes the dividend yield 4.8%, which will augment investor returns quite nicely.

Check out our latest analysis for Pacific Premier Bancorp

Pacific Premier Bancorp's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Pacific Premier Bancorp has a good history of paying out dividends, with its current track record at 5 years. Past distributions unfortunately do not guarantee future ones, and Pacific Premier Bancorp's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is worrying for investors of Pacific Premier Bancorp, as it points towards the dividends being unsustainable in the long term.

Looking forward, earnings per share is forecast to rise by 81.3% over the next year. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Pacific Premier Bancorp Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the annual payment back then was $0.88, compared to the most recent full-year payment of $1.32. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. Pacific Premier Bancorp has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Pacific Premier Bancorp's earnings per share has shrunk at approximately 4.9% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Pacific Premier Bancorp's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Pacific Premier Bancorp that investors should take into consideration. 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.

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