Readers hoping to buy Washington Trust Bancorp, Inc. (NASDAQ:WASH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 31st of March will not receive this dividend, which will be paid on the 9th of April.
Washington Trust Bancorp's next dividend payment will be US$0.52 per share, on the back of last year when the company paid a total of US$2.08 to shareholders. Based on the last year's worth of payments, Washington Trust Bancorp has a trailing yield of 4.0% on the current stock price of $52.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Washington Trust Bancorp paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.
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. This is why it's a relief to see Washington Trust Bancorp earnings per share are up 9.4% 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. In the past 10 years, Washington Trust Bancorp has increased its dividend at approximately 9.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has Washington Trust Bancorp got what it takes to maintain its dividend payments? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
So if you want to do more digging on Washington Trust Bancorp, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 2 warning signs for Washington Trust Bancorp (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.
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 decide to trade Washington Trust Bancorp, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all 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 editorial-team (at) simplywallst.com.