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Do These 3 Checks Before Buying Riverview Financial Corporation (NASDAQ:RIVE) For Its Upcoming Dividend

Simply Wall St

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 Financial Corporation (NASDAQ:RIVE) is about to go ex-dividend in just 4 days. You can purchase shares before the 12th of September in order to receive the dividend, which the company will pay on the 30th of September.

Riverview Financial's upcoming dividend is US$0.075 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Calculating the last year's worth of payments shows that Riverview Financial has a trailing yield of 3.8% on the current share price of $10.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Riverview Financial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Riverview Financial paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies.

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.

Click here to see how much of its profit Riverview Financial paid out over the last 12 months.

NasdaqGM:RIVE Historical Dividend Yield, September 7th 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Riverview Financial's earnings per share have been shrinking at 3.3% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Riverview Financial's dividend payments per share have declined at 6.2% per year on average over the past 5 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Should investors buy Riverview Financial for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Keen to explore more data on Riverview Financial's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.