Webster Financial (NYSE:WBS) Is Due To Pay A Dividend Of $0.40
The board of Webster Financial Corporation (NYSE:WBS) has announced that it will pay a dividend on the 16th of February, with investors receiving $0.40 per share. Based on this payment, the dividend yield will be 3.1%, which is fairly typical for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Webster Financial's stock price has increased by 36% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Webster Financial
Webster Financial's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Webster Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Webster Financial's payout ratio of 33% is a good sign as this means that earnings decently cover dividends.
The next 3 years are set to see EPS grow by 39.3%. Analysts forecast the future payout ratio could be 23% over the same time horizon, which is a number we think the company can maintain.
Webster Financial Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.40 in 2014 to the most recent total annual payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Webster Financial has seen EPS rising for the last five years, at 5.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Webster Financial Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign for Webster Financial that you should be aware of before investing. Is Webster 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.
