Read This Before Considering Waterstone Financial, Inc. (NASDAQ:WSBF) For Its Upcoming US$0.50 Dividend
Investors who want to cash in on Waterstone Financial, Inc.’s (NASDAQ:WSBF) upcoming dividend of US$0.50 per share have only 4 days left to buy the shares before its ex-dividend date, 20 March 2019, in time for dividends payable on the 02 April 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Waterstone Financial’s most recent financial data to examine its dividend characteristics in more detail.
View our latest analysis for Waterstone Financial
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
Is it paying an annual yield above 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Can it afford to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Waterstone Financial pass our checks?
The company currently pays out 43% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect WSBF’s payout to increase to 96% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 6.1%. However, EPS is forecasted to fall to $1 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Waterstone Financial as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Waterstone Financial produces a yield of 5.8%, which is high for Mortgage stocks.
Next Steps:
If you are building an income portfolio, then Waterstone Financial is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for WSBF’s future growth? Take a look at our free research report of analyst consensus for WSBF’s outlook.
Valuation: What is WSBF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WSBF is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
