Dividend Investors: Don't Be Too Quick To Buy WesBanco, Inc. (NASDAQ:WSBC) For Its Upcoming Dividend
WesBanco, Inc. (NASDAQ:WSBC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, WesBanco investors that purchase the stock on or after the 7th of March will not receive the dividend, which will be paid on the 1st of April.
The company's next dividend payment will be US$0.36 per share, on the back of last year when the company paid a total of US$1.44 to shareholders. Calculating the last year's worth of payments shows that WesBanco has a trailing yield of 5.1% on the current share price of US$28.50. 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! So we need to investigate whether WesBanco can afford its dividend, and if the dividend could grow.
View our latest analysis for WesBanco
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. WesBanco paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that WesBanco's earnings are down 3.0% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. WesBanco has delivered an average of 6.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
To Sum It Up
Is WesBanco an attractive dividend stock, or better left on the shelf? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Wondering what the future holds for WesBanco? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
