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Ames National Corporation (NASDAQ:ATLO) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Ames National's shares on or after the 1st of November, you won't be eligible to receive the dividend, when it is paid on the 15th of November.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Calculating the last year's worth of payments shows that Ames National has a trailing yield of 4.8% on the current share price of US$16.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Ames National has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Ames National
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Ames National paid out 103% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Click here to see how much of its profit Ames National paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Ames National's earnings per share have dropped 12% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Ames National has lifted its dividend by approximately 2.3% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Ames National is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.