AMERISAFE, Inc. (NASDAQ:AMSF) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that AMERISAFE, Inc. (NASDAQ:AMSF) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 11th of March will not receive this dividend, which will be paid on the 26th of March.

AMERISAFE's upcoming dividend is US$0.29 a share, following on from the last 12 months, when the company distributed a total of US$4.66 per share to shareholders. Based on the last year's worth of payments, AMERISAFE has a trailing yield of 7.5% on the current stock price of $62.14. If you buy this business for its dividend, you should have an idea of whether AMERISAFE's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for AMERISAFE

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. AMERISAFE has a low and conservative payout ratio of just 24% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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 AMERISAFE, with earnings per share up 3.8% 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. Since the start of our data, eight years ago, AMERISAFE has lifted its dividend by approximately 40% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is AMERISAFE an attractive dividend stock, or better left on the shelf? AMERISAFE has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. AMERISAFE 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.

While it's tempting to invest in AMERISAFE for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for AMERISAFE that we strongly recommend you have a look at before investing in the company.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade AMERISAFE, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.