Yahoo Finance Webster Financial (NYSE:WBS) Has Announced A Dividend Of US$0.40
The board of Webster Financial Corporation (NYSE:WBS) has announced that it will pay a dividend of US$0.40 per share on the 27th of May. This payment means that the dividend yield will be 3.2%, which is around the industry average.
View our latest analysis for Webster Financial
Webster Financial's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Webster Financial's earnings. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 65.7%. If the dividend continues on this path, the payout ratio could be 70% by next year, which we think can be pretty sustainable going forward.
Webster Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from US$0.20 in 2012 to the most recent annual payment of US$1.60. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Dividend Growth Is Doubtful
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Webster Financial's earnings per share has shrunk at approximately 7.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
We'd also point out that Webster Financial has issued stock equal to 97% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Our Thoughts On Webster Financial's Dividend
Overall, a consistent dividend is a good thing, and we think that Webster Financial has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Webster Financial (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
