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Should You Buy Western Alliance Bancorporation (NYSE:WAL) For Its Upcoming Dividend In 2 Days?

Simply Wall St

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Western Alliance Bancorporation (NYSE:WAL) is about to go ex-dividend in just 2 days. This means that investors who purchase shares on or after the 14th of May will not receive the dividend, which will be paid on the 29th of May.

Western Alliance Bancorporation's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Calculating the last year's worth of payments shows that Western Alliance Bancorporation has a trailing yield of 2.9% on the current share price of $34.39. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Western Alliance Bancorporation

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Western Alliance Bancorporation is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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 the company's payout ratio, plus analyst estimates of its future dividends.

NYSE:WAL Historical Dividend Yield May 11th 2020
NYSE:WAL Historical Dividend Yield May 11th 2020

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Western Alliance Bancorporation has grown its earnings rapidly, up 22% a year for the past five years.

Unfortunately Western Alliance Bancorporation has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Should investors buy Western Alliance Bancorporation 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 is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Western Alliance Bancorporation looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while Western Alliance Bancorporation looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Western Alliance Bancorporation that you should be aware of before investing in their shares.

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