Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Heritage Financial Corporation (NASDAQ:HFWA) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 3rd of November to receive the dividend, which will be paid on the 18th of November.
Heritage Financial's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.90 per share. Looking at the last 12 months of distributions, Heritage Financial has a trailing yield of approximately 4.4% on its current stock price of $20.61. If you buy this business for its dividend, you should have an idea of whether Heritage Financial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Heritage Financial paid out 72% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Heritage Financial earnings per share are up 6.0% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Heritage Financial has delivered 25% dividend growth per year on average over the past nine years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Heritage Financial? Heritage Financial has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Heritage Financial, you should know about the other risks facing this business. For example - Heritage Financial has 1 warning sign we think you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you’re looking to trade Heritage Financial, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.