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The board of Amerant Bancorp Inc. (NYSE:AMTB) has announced that it will pay a dividend on the 30th of May, with investors receiving $0.09 per share. This means the annual payment will be 2.1% of the current stock price, which is lower than the industry average.
Our free stock report includes 2 warning signs investors should be aware of before investing in Amerant Bancorp. Read for free now.
Amerant Bancorp Will Pay Out More Than It Is Earning
Even a low dividend yield can be attractive if it is sustained for years on end.
Amerant Bancorp has a short history of paying out dividends, with its current track record at only 3 years. While Amerant Bancorp's efforts to pay out a dividend can be applauded, its latest earnings report actually shows that the company didn't have enough earnings in the year to cover its dividends. This is worrying for investors as it points to Amerant Bancorp's dividends being unsustainable in the long term.
The next 12 months is set to see EPS grow by 105.4%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.
View our latest analysis for Amerant Bancorp
Amerant Bancorp Doesn't Have A Long Payment History
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.24 in 2022 to the most recent total annual payment of $0.36. This works out to be a compound annual growth rate (CAGR) of approximately 14% 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.
Dividend Growth Potential Is Shaky
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Over the past five years, it looks as though Amerant Bancorp's EPS has declined at around 11% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
An additional note is that the company has been raising capital by issuing stock equal to 25% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.