Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Amerisafe, Inc. (NASDAQ:AMSF) has paid dividends to shareholders, and these days it yields 8.0%. Does Amerisafe tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Want to help shape the future of investing tools and platforms? Take the survey and be part of one of the most advanced studies of stock market investors to date.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Amerisafe fare?
Amerisafe has a trailing twelve-month payout ratio of 31%, which means that the dividend is covered by earnings. Going forward, analysts expect AMSF’s payout to increase to 84% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.9%. In addition to this, EPS should increase to $3.29. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Amerisafe as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Amerisafe generates a yield of 8.0%, which is high for Insurance stocks.
Taking into account the dividend metrics, Amerisafe ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for AMSF’s future growth? Take a look at our free research report of analyst consensus for AMSF’s outlook.
- Valuation: What is AMSF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AMSF is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.