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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Heritage Financial Corporation (NASDAQ:HFWA) is about to trade ex-dividend in the next four days. You can purchase shares before the 4th of August in order to receive the dividend, which the company will pay on the 19th of August.
Heritage Financial's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.90 per share. Last year's total dividend payments show that Heritage Financial has a trailing yield of 4.6% on the current share price of $19.69. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are 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. Heritage Financial is paying out an acceptable 69% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Heritage Financial earnings per share are up 6.6% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Heritage Financial has delivered 25% dividend growth per year on average over the past nine years. 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.
To Sum It Up
Should investors buy Heritage Financial for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We think there are likely better opportunities out there.
If you want to look further into Heritage Financial, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 1 warning sign for Heritage Financial you should know about.
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.
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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