It looks like AmeriServ Financial, Inc. (NASDAQ:ASRV) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 31st of January will not receive this dividend, which will be paid on the 18th of February.
AmeriServ Financial's next dividend payment will be US$0.025 per share, on the back of last year when the company paid a total of US$0.10 to shareholders. Based on the last year's worth of payments, AmeriServ Financial has a trailing yield of 2.4% on the current stock price of $4.14. If you buy this business for its dividend, you should have an idea of whether AmeriServ Financial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AmeriServ Financial is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. With that in mind, we're encouraged by the steady growth at AmeriServ Financial, with earnings per share up 9.6% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past seven years, AmeriServ Financial has increased its dividend at approximately 14% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has AmeriServ Financial got what it takes to maintain its dividend payments? AmeriServ Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. AmeriServ Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about AmeriServ Financial's dividend performance? Check out this visualisation 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.
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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