U.S. markets closed

Is It Smart To Buy Western New England Bancorp, Inc. (NASDAQ:WNEB) Before It Goes Ex-Dividend?

Simply Wall St

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Western New England Bancorp, Inc. (NASDAQ:WNEB) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 26th of February.

Western New England Bancorp's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Looking at the last 12 months of distributions, Western New England Bancorp has a trailing yield of approximately 2.2% on its current stock price of $9.2. If you buy this business for its dividend, you should have an idea of whether Western New England Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Western New England Bancorp

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. Western New England Bancorp paid out a comfortable 39% of its profit last year.

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.

NasdaqGS:WNEB Historical Dividend Yield, February 7th 2020

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Western New England Bancorp earnings per share are up 8.5% per annum 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. Western New England Bancorp's dividend payments per share have declined at 10% per year on average over the past ten years, which is uninspiring. Western New England Bancorp is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

From a dividend perspective, should investors buy or avoid Western New England Bancorp? Western New England Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Western New England Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Curious what other investors think of Western New England Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.

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.

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. Thank you for reading.