Willis Towers Watson (NASDAQ:WTW) Is Paying Out A Larger Dividend Than Last Year
Willis Towers Watson Public Limited Company's (NASDAQ:WTW) dividend will be increasing from last year's payment of the same period to $0.88 on 15th of April. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.
Check out our latest analysis for Willis Towers Watson
Willis Towers Watson's Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Willis Towers Watson was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 60.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $2.97 in 2014, and the most recent fiscal year payment was $3.52. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Willis Towers Watson has been growing its earnings per share at 14% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Willis Towers Watson's prospects of growing its dividend payments in the future.
Willis Towers Watson Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend 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. For example, we've picked out 2 warning signs for Willis Towers Watson that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
