Should You Buy American National Bankshares Inc. (NASDAQ:AMNB) For Its Upcoming Dividend?

American National Bankshares Inc. (NASDAQ:AMNB) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 3rd of December in order to receive the dividend, which the company will pay on the 18th of December.

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. Calculating the last year's worth of payments shows that American National Bankshares has a trailing yield of 4.0% on the current share price of $27.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether American National Bankshares has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for American National Bankshares

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately American National Bankshares's payout ratio is modest, at just 41% of profit.

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.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at American National Bankshares, with earnings per share up 10.0% 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 10 years, American National Bankshares has increased its dividend at approximately 1.6% a year on average.

Final Takeaway

Should investors buy American National Bankshares for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. American National Bankshares 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.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, American National Bankshares has 2 warning signs (and 1 which shouldn't be ignored) we think 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.

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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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