Westamerica Bancorporation (NASDAQ:WABC) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 1st of November will not receive the dividend, which will be paid on the 15th of November.
Westamerica Bancorporation's next dividend payment will be US$0.4 per share. Last year, in total, the company distributed US$1.6 to shareholders. Based on the last year's worth of payments, Westamerica Bancorporation stock has a trailing yield of around 2.5% on the current share price of $65.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Westamerica Bancorporation paid out 55% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Westamerica Bancorporation earnings per share are up 3.2% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Westamerica Bancorporation has lifted its dividend by approximately 1.3% a year on average.
Should investors buy Westamerica Bancorporation for the upcoming dividend? Westamerica Bancorporation has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
Curious what other investors think of Westamerica Bancorporation? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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