Waterstone Financial (NASDAQ:WSBF) Is Due To Pay A Dividend Of $0.20
Waterstone Financial, Inc. (NASDAQ:WSBF) has announced that it will pay a dividend of $0.20 per share on the 2nd of August. This makes the dividend yield 8.9%, which will augment investor returns quite nicely.
View our latest analysis for Waterstone Financial
Waterstone Financial Not Expected To Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Having paid out dividends for 9 years, Waterstone Financial has a good history of paying out a part of its earnings to shareholders. Despite this history however, Waterstone Financial's latest earnings report actually shows that the company didn't have enough earnings to cover its dividends, paying out more than it earned. This value is at an alarming sign that could mean that Waterstone Financial's dividend at its current rate may no longer be sustainable for longer.
Earnings per share is forecast to rise by 25.8% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the future payout ratio reaching 103% over the next year.
Waterstone Financial's Dividend Has Lacked Consistency
Looking back, Waterstone Financial's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was $0.20 in 2014, and the most recent fiscal year payment was $1.30. This means that it has been growing its distributions at 23% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Dividend Growth Is Doubtful
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Waterstone Financial's EPS has declined at around 5.5% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
We're Not Big Fans Of Waterstone Financial's Dividend
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Waterstone Financial that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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