Canadian Western Bank's (TSE:CWB) Dividend Will Be CA$0.29

The board of Canadian Western Bank (TSE:CWB) has announced that it will pay a dividend of CA$0.29 per share on the 23rd of September. Based on this payment, the dividend yield will be 3.1%, which is fairly typical for the industry.

Check out our latest analysis for Canadian Western Bank

Canadian Western Bank's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Canadian Western Bank's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 7.2%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Canadian Western Bank Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from CA$0.52 in 2011 to the most recent annual payment of CA$1.16. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Canadian Western Bank has seen EPS rising for the last five years, at 9.0% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Canadian Western Bank's prospects of growing its dividend payments in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Canadian Western Bank that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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