The board of AmeriServ Financial, Inc. (NASDAQ:ASRV) has announced that it will pay a dividend of US$0.025 per share on the 16th of August. This means the dividend yield will be fairly typical at 2.6%.
AmeriServ Financial's Earnings Easily Cover the Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, AmeriServ Financial's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 12.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.
AmeriServ Financial Doesn't Have A Long Payment History
It is great to see that AmeriServ Financial has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from US$0.04 in 2013 to the most recent annual payment of US$0.10. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. AmeriServ Financial has seen EPS rising for the last five years, at 13% per annum. AmeriServ Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
AmeriServ Financial Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think AmeriServ Financial might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for AmeriServ Financial that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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