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Webster Financial Corporation (NYSE:WBS) will pay a dividend of $0.40 on the 20th of February. Based on this payment, the dividend yield will be 2.7%, which is fairly typical for the industry.
See our latest analysis for Webster Financial
Webster Financial's Dividend Forecasted To Be Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Having distributed dividends for at least 10 years, Webster Financial has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 37%, which means that Webster Financial would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, EPS is forecast to rise by 67.4% over the next 3 years. Analysts forecast the future payout ratio could be 25% over the same time horizon, which is a number we think the company can maintain.
Webster Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.80 in 2015, and the most recent fiscal year payment was $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Webster Financial May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Webster Financial's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Webster Financial has the option to increase the payout ratio to return more cash to shareholders.
Webster Financial Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Webster Financial might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Webster Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.