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Readers hoping to buy AmeriServ Financial, Inc. (NASDAQ:ASRV) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase AmeriServ Financial's shares before the 30th of July to receive the dividend, which will be paid on the 16th of August.
The company's next dividend payment will be US$0.025 per share, and in the last 12 months, the company paid a total of US$0.10 per share. Last year's total dividend payments show that AmeriServ Financial has a trailing yield of 2.6% on the current share price of $3.85. If you buy this business for its dividend, you should have an idea of whether AmeriServ Financial's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. That's why it's good to see AmeriServ Financial paying out a modest 32% of its earnings.
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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that AmeriServ Financial's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, eight years ago, AmeriServ Financial has lifted its dividend by approximately 12% a year on average.
The Bottom Line
Is AmeriServ Financial worth buying for its dividend? Earnings per share have been flat in recent years, although AmeriServ Financial reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, AmeriServ Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for AmeriServ Financial that we recommend you consider before investing in the business.
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.
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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