Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see WSFS Financial Corporation (NASDAQ:WSFS) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 7th of August to receive the dividend, which will be paid on the 22nd of August.
WSFS Financial’s next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Looking at the last 12 months of distributions, WSFS Financial has a trailing yield of approximately 1.2% on its current stock price of $41.53. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. WSFS Financial paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, WSFS Financial’s earnings per share have been growing at 12% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. WSFS Financial has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is WSFS Financial worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. In summary, WSFS Financial appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Ever wonder what the future holds for WSFS Financial? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.