There is a lot to be liked about American National Bankshares Inc (NASDAQ:AMNB) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 2.8% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at American National Bankshares in more detail.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does American National Bankshares fit our criteria?
The company currently pays out 44% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect AMNB’s payout to fall to 33% of its earnings, which leads to a dividend yield of around 2.9%. However, EPS should increase to $2.92, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of AMNB it has increased its DPS from $0.92 to $1 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes AMNB a true dividend rockstar.
Compared to its peers, American National Bankshares has a yield of 2.8%, which is high for Banks stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank American National Bankshares as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for AMNB’s future growth? Take a look at our free research report of analyst consensus for AMNB’s outlook.
- Valuation: What is AMNB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AMNB is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.