West Bancorporation, Inc. (NASDAQ:WTBA) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 4th of February in order to be eligible for this dividend, which will be paid on the 19th of February.
West Bancorporation's next dividend payment will be US$0.21 per share, on the back of last year when the company paid a total of US$0.84 to shareholders. Based on the last year's worth of payments, West Bancorporation has a trailing yield of 3.5% on the current stock price of $23.73. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether West Bancorporation can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately West Bancorporation's payout ratio is modest, at just 47% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at West Bancorporation, with earnings per share up 6.9% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. West Bancorporation has delivered an average of 36% per year annual increase in its dividend, based on the past ten years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is West Bancorporation worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, West Bancorporation appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Keen to explore more data on West Bancorporation's financial performance? Check out our visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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