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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Riverview Bancorp, Inc. (NASDAQ:RVSB) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 4th of January to receive the dividend, which will be paid on the 18th of January.
Riverview Bancorp's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Looking at the last 12 months of distributions, Riverview Bancorp has a trailing yield of approximately 3.8% on its current stock price of $5.2. If you buy this business for its dividend, you should have an idea of whether Riverview Bancorp's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Riverview Bancorp
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. Fortunately Riverview Bancorp's payout ratio is modest, at just 45% of profit.
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 how much of its profit Riverview Bancorp paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Riverview Bancorp's earnings per share have been growing at 17% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Riverview Bancorp has delivered an average of 28% per year annual increase in its dividend, based on the past six years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Riverview Bancorp worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Riverview Bancorp more closely.