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It looks like AmeriServ Financial, Inc. (NASDAQ:ASRV) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 2nd of August will not receive the dividend, which will be paid on the 19th of August.
AmeriServ Financial's upcoming dividend is US$0.025 a share, following on from the last 12 months, when the company distributed a total of US$0.10 per share to shareholders. Last year's total dividend payments show that AmeriServ Financial has a trailing yield of 2.4% on the current share price of $4.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether AmeriServ Financial has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AmeriServ Financial has a low and conservative payout ratio of just 19% of its income after tax.
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 11% 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. AmeriServ Financial's dividend payments are effectively flat on where they were ten years ago.
To Sum It Up
Has AmeriServ Financial got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, AmeriServ Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Want to learn more about AmeriServ Financial? Here's a visualisation of its historical rate of revenue and earnings growth.
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.
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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. Thank you for reading.