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The board of WVS Financial Corp. (NASDAQ:WVFC) has announced that it will pay a dividend of US$0.10 per share on the 18th of November. This payment means the dividend yield will be 2.6%, which is below the average for the industry.
WVS Financial's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, WVS Financial's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 2.3% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 73%, which is definitely feasible to continue.
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from US$0.16 to US$0.40. This means that it has been growing its distributions at 9.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
WVS Financial May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. WVS Financial has seen earnings per share falling at 2.3% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for WVS Financial that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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