WVS Financial Corp. (NASDAQ:WVFC) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 7th of February, you won’t be eligible to receive this dividend, when it is paid on the 20th of February.
WVS Financial’s next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.48 to shareholders. Looking at the last 12 months of distributions, WVS Financial has a trailing yield of approximately 2.8% on its current stock price of $16.93. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. WVS Financial paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s encouraging to see WVS Financial has grown its earnings rapidly, up 29% a year for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. WVS Financial has seen its dividend decline 2.8% per annum on average over the past ten years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Is WVS Financial an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating WVS Financial more closely.
Keen to explore more data on WVS Financial’s financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.