Peoples Bancorp's High-Yield Dividends: A Regional Banking Gem for Income Investors

The regional banking sector has long been a haven for income-focused investors, and Peoples Bancorp Inc. (PEBO) stands out with its 5.89% annualized dividend yield—a mouthwatering payout fueled by robust earnings and shareholder-friendly policies. Meanwhile, its lesser-known peer Peoples Bancorp of NC (PEBK) recently surprised investors with a special $0.16 dividend, adding to its appeal. Together, these two regional banks offer a compelling mix of high yields, stable balance sheets, and growth catalysts. But is their dividend strategy sustainable? Let’s dig in.

The Dividend Dynamo: PEBO’s 5.89% Yield and Sustainable Payout

Peoples Bancorp (PEBO) has built a reputation for returning capital to shareholders, with a quarterly dividend of $0.41 per share (annualized to $1.64). This equates to a 5.89% yield based on its April 2025 stock price of $27.85, though recent price appreciation to $31.02 in May 2025 slightly reduces the trailing yield to 5.29%.

Why the payout is sustainable:
- Strong Earnings Backing: The Q1 2025 dividend represented 60.1% of quarterly net income, but the trailing twelve-month (TTM) payout ratio is a more conservative 50.57%, leaving ample room for reinvestment.
- Rock-Solid Balance Sheet: With $9.2 billion in total assets and a loan-to-deposit ratio of 83%, PEBO maintains prudent liquidity. Deposits grew by $144.5 million in Q1 2025, fueled by governmental and money market accounts.
- Improved Asset Quality: Criticized loans dropped by $14.4 million, and nonperforming assets fell to 0.71% of total loans, signaling minimal credit risk.

PEBK’s Special Dividend Surprise: A Hidden Gem?

While smaller in scale, PEBK delivered a pleasant surprise in early 2025 with a $0.16 special dividend—paid in February 2025—to shareholders. Combined with its regular dividend (not specified in data), this boosts its overall yield appeal.

Key strengths of PEBK:
- Niche Market Dominance: Operating in North Carolina, PEBK serves a loyal customer base with 16 banking offices and a focus on small-to-medium businesses.
- Capital Flexibility: With $1.3 billion in stockholders’ equity, PEBK can weather interest rate fluctuations and deploy capital for acquisitions or buybacks.

Risks to Consider: Interest Rates and Margin Pressures

No dividend stock is without risks. Both banks face headwinds from:
1. Narrowing Net Interest Margins (NIM): PEBO’s NIM dipped to 4.12% in Q1 2025, pressured by reduced accretion income. PEBK’s smaller scale makes it similarly vulnerable.
2. Deposit Cost Management: Rising rates forced both banks to reprice deposits, though PEBO’s 12-basis-point quarterly deposit cost decline shows progress.

Why These Banks Are Winning Long-Term

Despite short-term volatility, PEBO and PEBK are positioned for long-term success:
- Diversified Footprint: PEBO’s multi-state operations and PEBK’s North Carolina dominance reduce geographic risk.
- Shareholder-Friendly Policies: Both banks prioritize dividends over excessive growth, with PEBO’s TTM dividend growth rate of 2.5% and PEBK’s special payout signaling commitment to returns.
- Asset Quality Improvements: Declining criticized loans and stable NPA ratios suggest stronger credit underwriting.

Investment Thesis: Buy the Dip, Hold for Income

The recent dip in PEBO’s yield (to 5.29% as of May 2025) creates a buying opportunity. Pair this with PEBK’s special dividend surprise, and you’ve got a high-yield duo with low correlation to volatile tech stocks.

Action Items for Investors:
1. Buy PEBO at current levels, targeting its $31.02 price for a 5.29% yield.
2. Add PEBK for its special dividend kicker, especially if its stock remains undervalued.
3. Reinvest Dividends: Both banks offer DRIP programs, compounding returns over time.

Final Take

In a world of 2% bond yields, PEBO and PEBK offer 5%-6% dividend yields with the added upside of banking sector tailwinds. Their robust balance sheets, improving asset quality, and shareholder-centric policies make them must-own names for income portfolios. Don’t let short-term NIM pressures distract—you’re buying dividends, not just stocks.

Act now—these regional banking gems won’t stay cheap forever.

Note: Always conduct your own research and consult a financial advisor before making investment decisions.