Last update on 2024-06-27

AmeriServ Financial (ASRV) - Dividend Analysis (Final Score: 3/8)

Analyze the dividend stability and policy of AmeriServ Financial (ASRV). Understand its performance across key metrics from payout ratio to growth rate.

Short Analysis - Dividend Score: 3

We're running AmeriServ Financial (ASRV) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

AmeriServ Financial (ASRV) was analyzed based on an 8-criteria dividend scoring system and received a score of 3 out of 8. Key findings include: 1) ASRV's dividend yield (1.8519%) is lower than the industry average (2.76%), making it less attractive to income-focused investors. 2) The average annual dividend growth over 20 years is -4.65%, far below the 5% benchmark, indicating inconsistency and potential instability in dividend payments. 3) The average payout ratio of 12.66% is favorable, indicating strong earnings retention for business reinvestment. 4) Dividend coverage by earnings has improved since 2008 but remains modest, suggesting potential future vulnerabilities. 5) Dividend coverage by cash flow has been inconsistent, highlighting risk. 6) Dividends have been unstable with interruptions, especially from 2003 to 2010 and again reduced in 2023. 7) ASRV has not paid dividends consistently over 25 years, suggesting long-term inconsistencies. 8) There have been reliable stock repurchases, particularly from 2008-2020, which indicates confidence in the company’s future.

Insights for Value Investors Seeking Stable Income

Given the analysis, AmeriServ Financial (ASRV) has a mixed track record. While it retains earnings well and has had periods of reliable stock repurchases, the inconsistent and often lower-than-average dividend yield, coupled with unstable dividend history and fluctuations in dividend coverage, suggests caution. Investors seeking steady income and long-term dividend stability might find better options elsewhere. Therefore, a cautious approach is recommended for potential investors, keeping in mind the company's efforts towards stability and shareholder value in recent years.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the annual dividends paid out by a company as a percentage of its share price, indicating the income generated by an investment in the stock.

AmeriServ Financial's (ASRV) current dividend yield stands at 1.8519%, which is notably below the industry average of 2.76%. Looking at the pattern over the last 20 years, ASRV has had periods of no dividend payments (2003-2009), followed by a gradual resumption from 2010 onwards. The yield reached its peak in 2020 at 3.1949% but has since declined to the current level. The trend can be considered unfavorable as the declining yield over recent years indicates decreasing shareholder income relative to stock price. Compared to the industry, which has maintained a more stable and higher average yield, ASRV's lower yield reflects that the company's current dividend payouts may be less attractive to income-focused investors. Furthermore, the fact that the company did not pay dividends for several years could signal past financial instability, though recent continued payments suggest efforts to stabilize and return value to shareholders.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate criterion assesses whether AmeriServ Financial's dividends have grown by more than 5% annually over the past 20 years. It's important as it indicates the company's ability to steadily increase returns to shareholders.

Analyzing the Dividend Growth Rate for AmeriServ Financial (ASRV) over the last 20 years shows an average dividend ratio of -4.65%, which is significantly below the 5% threshold. The data also reflects years with no dividends (e.g., 2003, 2009) and even negative growth rates in some years (e.g., 2023: -47.83%, 2022: -15%). The highest growth observed was for 2014: 33.33%, but this was not consistent. Therefore, this trend is concerning for dividend-focused investors as the company has struggled to deliver steady and substantial dividend growth over the long term.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio measures the proportion of earnings a company pays out in dividends to shareholders. A payout ratio lower than 65% typically indicates the company retains enough earnings to fund growth and operations.

AmeriServ Financial (ASRV) exhibits an average payout ratio of approximately 12.66% over the last 20 years. This is a favorable trend as it is significantly lower than the 65% threshold, suggesting the company is retaining a substantial portion of its earnings to reinvest back into the business and potentially drive future growth. For instance, in several years like 2003-2007 and 2009-2012, the payout ratio was particularly low or even zero. This conservative dividend policy ensures financial stability, which is particularly critical during challenging economic periods. Such a trend is positive given the company’s robust capacity to satisfy its commitments to shareholders while maintaining a healthy reserve for operational needs and potential investments.

Dividends Well Covered by Earnings?

Dividends well-covered by earnings indicate a company's ability to sustain its dividend payouts without compromising financial stability.

Examining the data for AmeriServ Financial (ASRV), we observe that the dividend cover ratio was non-existent (0.0) or negative in many years up to the mid-2000s. This suggests that the company struggled with profitability or dividend sustainability during those periods. However, starting from 2008, there's a noticeable improvement. The dividend cover ratio rebounded, peaking at 0.410 in 2016. Recently, values have settled around 0.2-0.3, indicating a modest but stable coverage by earnings. This trend is slightly positive, yet still seems relatively low, implying potential vulnerability in challenging economic conditions. The complete lack of coverage in 2023, denoted by a ratio of 0.0, is a concerning signal for the company's future dividend stability.

Dividends Well Covered by Cash Flow?

Considering cash flow coverage of dividends ensures that a company is generating sufficient cash to sustain its dividend payments, indicating financial health and reliability.

An analysis of AmeriServ Financial's free cash flow and dividend payout amounts from 2003 to 2023 highlights a variable trend in the company's ability to cover dividends with cash flow. Recent years, specifically 2020, show a negative free cash flow of -$2.698 million contrasted with a dividend payout of $1.716 million, yielding a negative coverage ratio of -0.64, which is detrimental. However, 2022 showed some recovery with a positive ratio of 0.63, indicating improvements. Yet, the absence of dividends in 2023 clouds further analysis. Overall, while there are positive periods, the inconsistency over time suggests a need for cautious optimism.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments ensures investors have a reliable income stream, a key factor for long-term income-focused investing.

Analyzing AmeriServ Financial's (ASRV) dividend history over the last 20 years reveals periods of volatility and inconsistency. From 2003 to 2010, there were no dividends paid at all, highlighting a lack of stability. Although dividends resumed from 2011 onward with gradual increases, there were notable variations. For instance, the most recent year, 2023, witnessed a significant drop in the dividend per share from $0.115 to $0.06, which exceeds the 20% threshold, albeit the return year '2023' was not marked true. This variability indicates that while ASRV has had moments of dividend growth, it does not fully meet the criterion for stable dividends, thus posing a concern for income-seeking investors who prioritize steady payouts.

Dividends Paid for Over 25 Years?

Examine if the company has consistently paid dividends over the past 25 years and if it meets the benchmark for long-term dividend payments.

Over the past 25 years, AmeriServ Financial (ASRV) had intermittent periods of dividend payments. From 1998 to 2002, dividends were consistently paid but stopped completely from 2003 to 2009. After a minimal dividend in 2010, payments cut off again from 2011 to 2013. Since 2014, the dividend has gradually increased with some fluctuations, but has not reached the levels seen in the 90s. This is a concerning trend for long-term dividend investors seeking stable income, given the interruptions and variability. Therefore, ASRV (AmeriServ Financial) does not meet the criteria of paying dividends consistently over 25 years, marking it as a weaker prospect for those prioritizing dividend stability.

Reliable Stock Repurchases Over the Past 20 Years?

Analyzing a company's history of stock repurchases over the past 20 years is crucial because it indicates management's confidence in the company's future, a potential means of returning value to shareholders, and an effort to maintain or increase the stock price.

AmeriServ Financial has made various stock repurchases over the past two decades, with a notable emphasis between 2008 and 2020. The average number of shares repurchased annually during this period stands at approximately 1.3591 million. This trend is positive for shareholders, as reducing the number of shares outstanding generally helps increase earnings per share (EPS). Reliable repurchasing activities, especially during years like 2008 to 2020, further suggest that the management is committed to returning value to its shareholders, boosting investor confidence. However, it’s worth noting the dilution in earlier years from 2003 to 2007, which somewhat offsets this otherwise favorable trend. Overall, the focused and consistent repurchases in the latter years demonstrate a disciplined approach towards capital allocation.