The board of Ameris Bancorp (NYSE:ABCB) has announced that the dividend on 6th of January will be increased to $0.20, which will be 33% higher than last year's payment of $0.15 which covered the same period. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.
Check out our latest analysis for Ameris Bancorp
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Ameris Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 13% also shows that Ameris Bancorp is able to comfortably pay dividends.
Looking forward, EPS is forecast to rise by 19.7% over the next 3 years. Analysts estimate the future payout ratio will be 11% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.20 in 2014, and the most recent fiscal year payment was $0.60. This means that it has been growing its distributions at 12% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Ameris Bancorp has impressed us by growing EPS at 12% per year over the past five years. Ameris Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Overall, a dividend increase is always good, and we think that Ameris Bancorp is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Ameris Bancorp that investors should take into consideration. Is Ameris Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.