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Should You Buy ACNB Corporation (NASDAQ:ACNB) For Its Upcoming Dividend In 4 Days?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ACNB Corporation (NASDAQ:ACNB) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 27th of February will not receive the dividend, which will be paid on the 13th of March.

ACNB's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Calculating the last year's worth of payments shows that ACNB has a trailing yield of 2.8% on the current share price of $35.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether ACNB can afford its dividend, and if the dividend could grow.

Check out our latest analysis for ACNB

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately ACNB's payout ratio is modest, at just 29% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit ACNB paid out over the last 12 months.

NasdaqCM:ACNB Historical Dividend Yield, February 22nd 2020
NasdaqCM:ACNB Historical Dividend Yield, February 22nd 2020

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see ACNB's earnings per share have risen 14% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ACNB has delivered 2.8% dividend growth per year on average over the past ten years. Earnings per share have been growing much quicker than dividends, potentially because ACNB is keeping back more of its profits to grow the business.

To Sum It Up

Should investors buy ACNB for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. ACNB ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Want to learn more about ACNB? Here's a visualisation of its historical rate of revenue and earnings growth.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.