Waterstone Financial (NASDAQ:WSBF) Is Due To Pay A Dividend Of US$0.20
The board of Waterstone Financial, Inc. (NASDAQ:WSBF) has announced that it will pay a dividend on the 3rd of May, with investors receiving US$0.20 per share. This makes the dividend yield 9.2%, which will augment investor returns quite nicely.
View our latest analysis for Waterstone Financial
Waterstone Financial Is Paying Out More Than It Is Earning
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Waterstone Financial's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 52.0%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 151%, which could put the dividend under pressure if earnings don't start to improve.
Waterstone Financial's Dividend Has Lacked Consistency
It's comforting to see that Waterstone Financial has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the first annual payment was US$0.20, compared to the most recent full-year payment of US$1.30. This means that it has been growing its distributions at 26% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Waterstone Financial has grown earnings per share at 25% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Waterstone Financial Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Waterstone Financial has 2 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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