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We Wouldn't Be Too Quick To Buy American National Bankshares Inc. (NASDAQ:AMNB) Before It Goes Ex-Dividend

Simply Wall St

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that American National Bankshares Inc. (NASDAQ:AMNB) is about to go ex-dividend in just 3 days. You can purchase shares before the 5th of September in order to receive the dividend, which the company will pay on the 20th of September.

American National Bankshares's upcoming dividend is US$0.27 a share, following on from the last 12 months, when the company distributed a total of US$1.08 per share to shareholders. Based on the last year's worth of payments, American National Bankshares stock has a trailing yield of around 3.2% on the current share price of $34.2. If you buy this business for its dividend, you should have an idea of whether American National Bankshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for American National Bankshares

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. American National Bankshares is paying out an acceptable 60% of its profit, a common payout level among most companies.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:AMNB Historical Dividend Yield, September 1st 2019

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that American National Bankshares's earnings are down 3.6% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, American National Bankshares has lifted its dividend by approximately 1.6% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid American National Bankshares? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. American National Bankshares doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Ever wonder what the future holds for American National Bankshares? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.