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It looks like Wells Fargo & Company (NYSE:WFC) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Wells Fargo's shares on or after the 9th of May will not receive the dividend, which will be paid on the 1st of June.
The company's next dividend payment will be US$0.40 per share, on the back of last year when the company paid a total of US$1.60 to shareholders. Calculating the last year's worth of payments shows that Wells Fargo has a trailing yield of 2.2% on the current share price of US$73.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Wells Fargo has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Wells Fargo paying out a modest 28% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Check out our latest analysis for Wells Fargo
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. With that in mind, we're encouraged by the steady growth at Wells Fargo, with earnings per share up 7.1% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Wells Fargo has lifted its dividend by approximately 1.3% a year on average.
To Sum It Up
Is Wells Fargo worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Wells Fargo looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.