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It looks like AmeriServ Financial, Inc. (NASDAQ:ASRV) is about to go ex-dividend in the next three days. Investors can purchase shares before the 30th of April in order to be eligible for this dividend, which will be paid on the 17th of May.
AmeriServ Financial's next dividend payment will be US$0.025 per share, and in the last 12 months, the company paid a total of US$0.10 per share. Based on the last year's worth of payments, AmeriServ Financial has a trailing yield of 2.4% on the current stock price of $4.18. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether AmeriServ Financial can afford its dividend, and if the dividend could grow.
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. AmeriServ Financial paid out a comfortable 32% of its profit last year. 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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about AmeriServ Financial's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, AmeriServ Financial has lifted its dividend by approximately 12% a year on average.
To Sum It Up
Is AmeriServ Financial worth buying for its dividend? AmeriServ Financial has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating AmeriServ Financial more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for AmeriServ Financial you should know about.
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.
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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