Westamerica Bancorporation (NASDAQ:WABC) is about to trade ex-dividend in the next three days. This means that investors who purchase shares on or after the 30th of April will not receive the dividend, which will be paid on the 14th of May.
Westamerica Bancorporation’s next dividend payment will be US$0.41 per share, on the back of last year when the company paid a total of US$1.64 to shareholders. Looking at the last 12 months of distributions, Westamerica Bancorporation has a trailing yield of approximately 2.5% on its current stock price of $64.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Westamerica Bancorporation can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Westamerica Bancorporation paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see Westamerica Bancorporation earnings per share are up 6.2% 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. Westamerica Bancorporation has delivered 1.3% dividend growth per year on average over the past 10 years.
The Bottom Line
Is Westamerica Bancorporation an attractive dividend stock, or better left on the shelf? 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. At best we would put it on a watch-list to see if business conditions improve, as it doesn’t look like a clear opportunity right now.
With that being said, if dividends aren’t your biggest concern with Westamerica Bancorporation, you should know about the other risks facing this business. For example, Westamerica Bancorporation has 2 warning signs (and 1 which can’t be ignored) we think you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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