Should You Buy Amerant Bancorp Inc. (NASDAQ:AMTB) For Its Upcoming Dividend?
Amerant Bancorp Inc. (NASDAQ:AMTB) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Amerant Bancorp investors that purchase the stock on or after the 16th of August will not receive the dividend, which will be paid on the 31st of August.
The company's next dividend payment will be US$0.09 per share. Last year, in total, the company distributed US$0.36 to shareholders. Based on the last year's worth of payments, Amerant Bancorp stock has a trailing yield of around 1.3% on the current share price of $28.4. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Amerant Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Amerant Bancorp is paying out just 8.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Amerant Bancorp paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Amerant Bancorp's earnings have been skyrocketing, up 41% per annum for the past five years.
Unfortunately Amerant Bancorp has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Final Takeaway
Is Amerant Bancorp an attractive dividend stock, or better left on the shelf? Companies like Amerant Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Amerant Bancorp more closely.
Curious what other investors think of Amerant Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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