Avidia Bancorp, Inc. (NYSE:AVBC) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Avidia Bancorp investors that purchase the stock on or after the 19th of May will not receive the dividend, which will be paid on the 28th of May.

The upcoming dividend for Avidia Bancorp is US$0.05 per share. 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 Avidia Bancorp has been able to grow its dividends, or if the dividend might be cut.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Avidia Bancorp paid out just 6.5% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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 Avidia Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend.

Avidia Bancorp also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

This is Avidia Bancorp's first year of paying a regular dividend, so it doesn't have much of a history yet to compare to.

Final Takeaway

Is Avidia Bancorp an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent years, although Avidia Bancorp reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Avidia Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

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

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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.