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AMERISAFE (NASDAQ:AMSF) Could Be A Buy For Its Upcoming Dividend

Simply Wall St
·3 min read

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see AMERISAFE, Inc. (NASDAQ:AMSF) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 9th of November in order to be eligible for this dividend, which will be paid on the 18th of November.

AMERISAFE's next dividend payment will be US$3.50 per share, on the back of last year when the company paid a total of US$4.58 to shareholders. Calculating the last year's worth of payments shows that AMERISAFE has a trailing yield of 7.6% on the current share price of $60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether AMERISAFE has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for AMERISAFE

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. AMERISAFE is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, AMERISAFE's earnings per share have been growing at 11% a year for the past 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, eight years ago, AMERISAFE has lifted its dividend by approximately 39% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy AMERISAFE for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, AMERISAFE looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we've spotted with AMERISAFE (including 1 which shouldn't be ignored).

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.