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Wells Fargo (NYSE:WFC) Will Pay A Larger Dividend Than Last Year At $0.30

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The board of Wells Fargo & Company (NYSE:WFC) has announced that it will be paying its dividend of $0.30 on the 1st of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Wells Fargo

Wells Fargo's Payment Expected To Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive.

Having distributed dividends for at least 10 years, Wells Fargo has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 21% also shows that Wells Fargo is able to comfortably pay dividends.

Looking forward, EPS is forecast to rise by 41.0% over the next 3 years. The future payout ratio could be 31% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

historic-dividend
historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was $0.48, compared to the most recent full-year payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wells Fargo might have put its house in order since then, but we remain cautious.

Wells Fargo May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Wells Fargo hasn't seen much change in its earnings per share over the last five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Wells Fargo's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For example, we've picked out 2 warning signs for Wells Fargo that investors should know about before committing capital to this stock. Is Wells Fargo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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