Waterstone Financial's (NASDAQ:WSBF) Dividend Will Be $0.20
The board of Waterstone Financial, Inc. (NASDAQ:WSBF) has announced that it will pay a dividend on the 2nd of May, with investors receiving $0.20 per share. This makes the dividend yield 8.6%, which will augment investor returns quite nicely.
Check out our latest analysis for Waterstone Financial
Waterstone Financial Will Pay Out More Than It Is Earning
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Waterstone Financial has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 90%shows that Waterstone Financial would be able to pay its last dividend without pressure on the balance sheet.
Earnings per share is forecast to rise by 64.2% over the next 3 years. However, over that same time horizon, analysts estimate the future payout ratio to be at 104%, which is a bit high and could start applying pressure to the balance sheet.
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. Since 2014, the dividend has gone from $0.20 total annually to $1.30. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. 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.
Waterstone Financial May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, Waterstone Financial's earnings per share has shrunk at approximately 2.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Waterstone Financial's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Waterstone Financial that you should be aware of before investing. Is Waterstone Financial not quite the opportunity you were looking for? Why not check out our selection of top 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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