Avidia Bancorp, Inc. (NYSE:AVBC) stock is about to trade ex-dividend in 3 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 as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Avidia Bancorp's shares before the 18th of August in order to be eligible for the dividend, which will be paid on the 27th of August.

The company's next dividend payment will be US$0.06 per share. Last year, in total, the company distributed US$0.24 to shareholders. Calculating the last year's worth of payments shows that Avidia Bancorp has a trailing yield of 1.1% on the current share price of US$22.05. If you buy this business for its dividend, you should have an idea of whether Avidia Bancorp's dividend is reliable and sustainable. So we need to investigate whether Avidia Bancorp can afford its dividend, and if the dividend could grow.

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. 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously.

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. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Given that Avidia Bancorp has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Has Avidia Bancorp got what it takes to maintain its dividend payments? 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. Avidia Bancorp 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.

Keen to explore more data on Avidia Bancorp's financial performance? Check out our visualisation of its historical revenue and earnings growth.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.