AmeriServ Financial (NASDAQ:ASRV) Is Paying Out A Larger Dividend Than Last Year

AmeriServ Financial, Inc. (NASDAQ:ASRV) will increase its dividend on the 23rd of May to US$0.03. Based on the announced payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

See our latest analysis for AmeriServ Financial

AmeriServ Financial's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, AmeriServ Financial's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 10.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

AmeriServ Financial Is Still Building Its Track Record

AmeriServ Financial's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2013, the dividend has gone from US$0.04 to US$0.12. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. AmeriServ Financial has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see AmeriServ Financial has been growing its earnings per share at 11% a year over the past five years. 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for AmeriServ Financial that investors should know about before committing capital to this stock. 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.