Riverview Bancorp (NASDAQ:RVSB) Has Announced That Its Dividend Will Be Reduced To $0.02

Simply Wall St · 07/01 10:28

Riverview Bancorp, Inc.'s (NASDAQ:RVSB) dividend is being reduced by 67% to $0.02 per share on 22nd of July, in comparison to last year's comparable payment of $0.06. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

See our latest analysis for Riverview Bancorp

Riverview Bancorp's Dividend Forecasted To Be Well Covered By Earnings

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 worrying for investors of Riverview Bancorp, as it points towards the dividends being unsustainable in the long term.

According to analysts, EPS should be several times higher in the next 3 years. They also estimate the payout ratio reaching 53% in the same time period, which is fairly sustainable.

NasdaqGS:RVSB Historic Dividend July 1st 2024

Riverview Bancorp Doesn't Have A Long Payment History

Riverview Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the dividend has gone from $0.045 total annually to $0.24. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend 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. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.