Washington Trust Bancorp, Inc. (NASDAQ:WASH) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 30th of September to receive the dividend, which will be paid on the 11th of October.
Washington Trust Bancorp's next dividend payment will be US$0.5 per share. Last year, in total, the company distributed US$2.0 to shareholders. Calculating the last year's worth of payments shows that Washington Trust Bancorp has a trailing yield of 4.2% on the current share price of $48.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
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. Washington Trust Bancorp paid out a comfortable 47% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Washington Trust Bancorp's earnings per share have been growing at 13% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Washington Trust Bancorp has increased its dividend at approximately 9.3% 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
From a dividend perspective, should investors buy or avoid Washington Trust Bancorp? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Washington Trust Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of Washington Trust 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.