American River Bankshares (NASDAQ:AMRB) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 28th of January in order to be eligible for this dividend, which will be paid on the 12th of February.
American River Bankshares's next dividend payment will be US$0.07 per share. Last year, in total, the company distributed US$0.28 to shareholders. Based on the last year's worth of payments, American River Bankshares has a trailing yield of 1.9% on the current stock price of $14.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether American River Bankshares has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see American River Bankshares paying out a modest 25% of its earnings.
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?
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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see American River Bankshares has grown its earnings rapidly, up 21% 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. American River Bankshares has seen its dividend decline 6.9% per annum on average over the past ten years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Has American River Bankshares got what it takes to maintain its dividend payments? Companies like American River Bankshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. 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, American River Bankshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for American River Bankshares? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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