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Is It Smart To Buy ACNB Corporation (NASDAQ:ACNB) Before It Goes Ex-Dividend?

Simply Wall St

It looks like ACNB Corporation (NASDAQ:ACNB) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 28th of August will not receive this dividend, which will be paid on the 13th of September.

ACNB's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Calculating the last year's worth of payments shows that ACNB has a trailing yield of 3.1% on the current share price of $32.51. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for ACNB

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately ACNB's payout ratio is modest, at just 28% 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.

Click here to see how much of its profit ACNB paid out over the last 12 months.

NasdaqCM:ACNB Historical Dividend Yield, August 24th 2019

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, ACNB's earnings per share have been growing at 17% 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, 10 years ago, ACNB has lifted its dividend by approximately 2.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Should investors buy ACNB 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 strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, ACNB appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Curious about whether ACNB has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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 editorial-team@simplywallst.com. 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.