AMERISAFE (NASDAQ:AMSF) Has Announced A Dividend Of $0.37
AMERISAFE, Inc.'s (NASDAQ:AMSF) investors are due to receive a payment of $0.37 per share on 22nd of March. This will take the dividend yield to an attractive 9.8%, providing a nice boost to shareholder returns.
Check out our latest analysis for AMERISAFE
AMERISAFE Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, AMERISAFE is earning enough to cover the payment, but then it makes up 552% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
EPS is set to fall by 51.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.32 in 2014, and the most recent fiscal year payment was $4.98. This means that it has been growing its distributions at 32% per annum over that time. AMERISAFE has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
AMERISAFE May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though AMERISAFE's EPS has declined at around 2.7% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
AMERISAFE's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think AMERISAFE's payments are rock solid. While AMERISAFE is earning enough to cover the payments, the cash flows are lacking. We don't think AMERISAFE is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, AMERISAFE has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
