American National Bankshares' (NASDAQ:AMNB) Shareholders Will Receive A Bigger Dividend Than Last Year

American National Bankshares Inc. (NASDAQ:AMNB) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of March to $0.30. This takes the annual payment to 3.6% of the current stock price, which is about average for the industry.

View our latest analysis for American National Bankshares

American National Bankshares' Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

American National Bankshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 35%, which means that American National Bankshares would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 17.3%. The future payout ratio could be 33% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

American National Bankshares Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.92 in 2013, and the most recent fiscal year payment was $1.20. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. American National Bankshares has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like American National Bankshares' Dividend

Overall, a dividend increase is always good, and we think that American National Bankshares is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on American National Bankshares management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.