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Interested In Western Union's (NYSE:WU) Upcoming US$0.23 Dividend? You Have Four Days Left

Simply Wall St
·3 min read

The Western Union Company (NYSE:WU) stock is about to trade ex-dividend in four days. You can purchase shares before the 15th of September in order to receive the dividend, which the company will pay on the 30th of September.

Western Union's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.90 per share. Calculating the last year's worth of payments shows that Western Union has a trailing yield of 4.0% on the current share price of $22.69. 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.

Check out our latest analysis for Western Union

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Western Union paid out 58% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Western Union's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Western Union has lifted its dividend by approximately 14% a year on average.

Final Takeaway

Has Western Union got what it takes to maintain its dividend payments? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you're not too concerned about Western Union's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 2 warning signs with Western Union and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.