Yahoo Finance Riverview Bancorp's (NASDAQ:RVSB) Dividend Is Being Reduced To $0.02
The board of Riverview Bancorp, Inc. (NASDAQ:RVSB) has announced that the dividend on 22nd of July will be reduced by 67% from last year's $0.06 to $0.02. The dividend yield of 6.0% is still a nice boost to shareholder returns, despite the cut.
See our latest analysis for Riverview Bancorp
Riverview Bancorp's Earnings Will Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Having paid out dividends for 9 years, Riverview Bancorp has a good history of paying out a part of its earnings to shareholders. But while this history shows that Riverview Bancorp was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company's net income wasn't enough to cover dividends. This is an alarming sign for the sustainability of its dividends, as it may mean that Riverview Bancorpis pulling cash from elsewhere to keep its shareholders happy.
According to analysts, EPS should be several times higher in the next 3 years. They also estimate that the future payout ratio could reach 53% in the same time horizon, which is in a comfortable range for us.
Riverview Bancorp Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 9 years was $0.045 in 2015, and the most recent fiscal year payment was $0.24. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Riverview Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Riverview Bancorp's earnings per share has shrunk at 25% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Riverview Bancorp that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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