Is It Smart To Buy Western Alliance Bancorporation (NYSE:WAL) Before It Goes Ex-Dividend?
Western Alliance Bancorporation (NYSE:WAL) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Western Alliance Bancorporation's shares before the 15th of February to receive the dividend, which will be paid on the 1st of March.
The company's next dividend payment will be US$0.37 per share. Last year, in total, the company distributed US$1.48 to shareholders. Last year's total dividend payments show that Western Alliance Bancorporation has a trailing yield of 2.4% on the current share price of US$61.57. If you buy this business for its dividend, you should have an idea of whether Western Alliance Bancorporation's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Western Alliance Bancorporation
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. Western Alliance Bancorporation paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Western Alliance Bancorporation, with earnings per share up 9.4% on average over the last five years.
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, five years ago, Western Alliance Bancorporation has lifted its dividend by approximately 8.2% a year on average. 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 Western Alliance Bancorporation an attractive dividend stock, or better left on the shelf? 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. Overall, Western Alliance Bancorporation looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Western Alliance Bancorporation for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Western Alliance Bancorporation you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
