Shares of Amerisafe, Inc. (NASDAQ:AMSF) will begin trading ex-dividend in 3 days. To qualify for the dividend check of US$0.25 per share, investors must have owned the shares prior to 07 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Amerisafe as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
Does Amerisafe pass our checks?
The company currently pays out 24% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 122% which, assuming the share price stays the same, leads to a dividend yield of 4.8%. However, EPS is forecasted to fall to $3.35 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Amerisafe as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Amerisafe generates a yield of 7.2%, which is high for Insurance stocks.
If Amerisafe is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for AMSF’s future growth? Take a look at our free research report of analyst consensus for AMSF’s outlook.
- Valuation: What is AMSF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AMSF is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at email@example.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.