Is Riverview Bancorp, Inc. (NASDAQ:RVSB) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.
With a 2.4% yield and a five-year payment history, investors probably think Riverview Bancorp looks like a reliable dividend stock. A 2.4% yield is not inspiring, but the longer payment history has some appeal. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Riverview Bancorp paid out 22% of its profit as dividends, over the trailing twelve month period. We'd say its dividends are thoroughly covered by earnings.
Remember, you can always get a snapshot of Riverview Bancorp's latest financial position, by checking our visualisation of its financial health.
Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Riverview Bancorp has been paying a dividend for the past five years. During the past five-year period, the first annual payment was US$0.045 in 2014, compared to US$0.18 last year. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time.
Riverview Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth Potential
Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. In the last five years, Riverview Bancorp's earnings per share have shrunk at approximately 2.5% per annum. Declining earnings per share over a number of years is not a great sign for the dividend investor. Without some improvement, this does not bode well for the long term value of a company's dividend.
To summarise, shareholders should always check that Riverview Bancorp's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We're glad to see Riverview Bancorp has a low payout ratio, as this suggests earnings are being reinvested in the business. Earnings per share are down, and to our mind Riverview Bancorp has not been paying a dividend long enough to demonstrate its resilience across economic cycles. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Riverview Bancorp out there.
Are management backing themselves to deliver performance? Check their shareholdings in Riverview Bancorp in our latest insider ownership analysis.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.