American National Bankshares Inc. (NASDAQ:AMNB) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 3rd of September in order to be eligible for this dividend, which will be paid on the 18th of September.

American National Bankshares's next dividend payment will be US$0.27 per share, on the back of last year when the company paid a total of US$1.08 to shareholders. Calculating the last year's worth of payments shows that American National Bankshares has a trailing yield of 4.6% on the current share price of $23.38. If you buy this business for its dividend, you should have an idea of whether American National Bankshares's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for American National Bankshares

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. American National Bankshares paid out a comfortable 40% of its profit last year.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see American National Bankshares's earnings per share have risen 11% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, American National Bankshares has lifted its dividend by approximately 1.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because American National Bankshares is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy American National Bankshares for the upcoming dividend? Companies like American National Bankshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, American National Bankshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.