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It looks like Heritage Financial Corporation (NASDAQ:HFWA) is about to go ex-dividend in the next 4 days. You can purchase shares before the 9th of February in order to receive the dividend, which the company will pay on the 24th of February.
Heritage Financial's upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Last year's total dividend payments show that Heritage Financial has a trailing yield of 3.4% on the current share price of $23.59. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Heritage Financial has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Heritage Financial paid out 62% of its earnings to investors last year, a normal payout level for most businesses.
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 that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not enthused to see that Heritage Financial'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. Heritage Financial has delivered 21% dividend growth per year on average over the past 10 years.
To Sum It Up
Has Heritage Financial got what it takes to maintain its dividend payments? Heritage Financial's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
If you're not too concerned about Heritage Financial's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Case in point: We've spotted 2 warning signs for Heritage Financial you should be aware of.
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.
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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