The board of Riverview Bancorp, Inc. (NASDAQ:RVSB) has announced that it will pay a dividend on the 17th of January, with investors receiving US$0.055 per share. This payment means the dividend yield will be 2.7%, which is below the average for the industry.
Riverview Bancorp's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Riverview Bancorp was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 2.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.
Riverview Bancorp Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$0.045 in 2014 to the most recent annual payment of US$0.22. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Riverview Bancorp has impressed us by growing EPS at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Riverview Bancorp Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Riverview Bancorp might even raise payments in the future. 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.
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. Just as an example, we've come across 2 warning signs for Riverview Bancorp you should be aware of, and 1 of them makes us a bit uncomfortable. 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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