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American National Bankshares Inc. (NASDAQ:AMNB) stock is about to trade ex-dividend in four days. If you purchase the stock on or after the 4th of March, you won't be eligible to receive this dividend, when it is paid on the 19th of March.
American National Bankshares's next dividend payment will be US$0.27 per share. Last year, in total, the company distributed US$1.08 to shareholders. Based on the last year's worth of payments, American National Bankshares has a trailing yield of 3.5% on the current stock price of $31. 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 investigate whether American National Bankshares can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. American National Bankshares paid out a comfortable 39% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at American National Bankshares, with earnings per share up 9.6% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, American National Bankshares has lifted its dividend by approximately 1.6% a year on average.
Should investors buy American National Bankshares for the upcoming dividend? American National Bankshares has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, American National Bankshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while American National Bankshares looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for American National Bankshares that we recommend you consider before investing in the business.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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