Readers hoping to buy Great Western Bancorp, Inc. (NYSE:GWB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 14th of November in order to receive the dividend, which the company will pay on the 29th of November.
Great Western Bancorp's next dividend payment will be US$0.3 per share, on the back of last year when the company paid a total of US$1.2 to shareholders. Looking at the last 12 months of distributions, Great Western Bancorp has a trailing yield of approximately 3.3% on its current stock price of $35.83. If you buy this business for its dividend, you should have an idea of whether Great Western Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Great Western Bancorp's payout ratio is modest, at just 38% of profit.
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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Great Western Bancorp's earnings per share have been growing at 10% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Great Western Bancorp's dividend payments per share have declined at 7.4% per year on average over the past five years, which is uninspiring. Great Western Bancorp is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
From a dividend perspective, should investors buy or avoid Great Western Bancorp? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Great Western Bancorp more closely.
Ever wonder what the future holds for Great Western Bancorp? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.