Yahoo Finance Western Alliance Bancorporation (NYSE:WAL) Is Increasing Its Dividend To US$0.35
Western Alliance Bancorporation (NYSE:WAL) has announced that it will be increasing its dividend on the 27th of August to US$0.35. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
Check out our latest analysis for Western Alliance Bancorporation
Western Alliance Bancorporation's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Western Alliance Bancorporation was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 20.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.
Western Alliance Bancorporation Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2019, the first annual payment was US$1.00, compared to the most recent full-year payment of US$1.40. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Western Alliance Bancorporation has seen EPS rising for the last five years, at 26% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Our Thoughts On Western Alliance Bancorporation's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Western Alliance Bancorporation's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Western Alliance Bancorporation you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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. 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.
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