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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see AmeriServ Financial, Inc. (NASDAQ:ASRV) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 5th of February, you won't be eligible to receive this dividend, when it is paid on the 22nd of February.
AmeriServ Financial's next dividend payment will be US$0.025 per share. Last year, in total, the company distributed US$0.10 to shareholders. Based on the last year's worth of payments, AmeriServ Financial has a trailing yield of 2.9% on the current stock price of $3.4. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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 37% of profit. AmeriServ Financial paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that AmeriServ Financial's earnings are down 2.5% a year over 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, eight years ago, AmeriServ Financial has lifted its dividend by approximately 12% a year on average.
The Bottom Line
Is AmeriServ Financial worth buying for its dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think there are likely better opportunities out there.
So if you want to do more digging on AmeriServ Financial, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 2 warning signs for AmeriServ Financial that we recommend you consider before investing in the business.
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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