Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Riverview Bancorp, Inc. (NASDAQ:RVSB) is about to go ex-dividend in just 2 days. You will need to purchase shares before the 10th of October to receive the dividend, which will be paid on the 25th of October.
Riverview Bancorp's next dividend payment will be US$0.04 per share. Last year, in total, the company distributed US$0.2 to shareholders. Based on the last year's worth of payments, Riverview Bancorp stock has a trailing yield of around 2.5% on the current share price of $7.33. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Riverview Bancorp paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Riverview Bancorp's earnings are down 2.8% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Riverview Bancorp has delivered an average of 32% per year annual increase in its dividend, based on the past five years of dividend payments.
The Bottom Line
Has Riverview Bancorp got what it takes to maintain its dividend payments? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
Want to learn more about Riverview Bancorp? Here's a visualisation of its historical rate of revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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