Why Canadian Western Bank (TSE:CWB) Should Be In Your Portfolio
Over the past 10 years Canadian Western Bank (TSE:CWB) has been paying dividends to shareholders. The stock currently pays out a dividend yield of 3.8%, and has a market cap of CA$2.6b. Does Canadian Western Bank tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Canadian Western Bank
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How does Canadian Western Bank fare?
The company currently pays out 35% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CWB’s payout to remain around the same level at 33% of its earnings, which leads to a dividend yield of 4.1%. Moreover, EPS should increase to CA$3.03.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. CWB has increased its DPS from CA$0.44 to CA$1.04 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes CWB a true dividend rockstar.
Compared to its peers, Canadian Western Bank generates a yield of 3.8%, which is on the low-side for Banks stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Canadian Western Bank is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three relevant factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for CWB’s future growth? Take a look at our free research report of analyst consensus for CWB’s outlook.
Valuation: What is CWB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CWB is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
