Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that AmeriServ Financial, Inc. (NASDAQ:ASRV) is about to go ex-dividend in just four days. Investors can purchase shares before the 31st of July in order to be eligible for this dividend, which will be paid on the 17th of August.
AmeriServ Financial's next dividend payment will be US$0.025 per share, on the back of last year when the company paid a total of US$0.10 to shareholders. Based on the last year's worth of payments, AmeriServ Financial has a trailing yield of 3.4% on the current stock price of $2.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately AmeriServ Financial's payout ratio is modest, at just 33% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, AmeriServ Financial's earnings per share have been growing at 15% a year for the past five years.
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, seven years ago, AmeriServ Financial has lifted its dividend by approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy AmeriServ Financial 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, AmeriServ Financial 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. Our analysis shows 3 warning signs for AmeriServ Financial and you should be aware of these before buying any shares.
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.
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