Washington Trust Bancorp (NASDAQ:WASH) Has Affirmed Its Dividend Of $0.56

The board of Washington Trust Bancorp, Inc. (NASDAQ:WASH) has announced that it will pay a dividend on the 15th of January, with investors receiving $0.56 per share. This makes the dividend yield 7.0%, which will augment investor returns quite nicely.

View our latest analysis for Washington Trust Bancorp

Washington Trust Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Washington Trust Bancorp has a long history of paying out a part of its earnings to shareholders. Based on Washington Trust Bancorp's last earnings report, the payout ratio is at a decent 84%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 27.3%. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 74% over the same time period, which would make us comfortable with the sustainability of the dividend.

Washington Trust Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $1.16 total annually to $2.24. This means that it has been growing its distributions at 6.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Washington Trust Bancorp's EPS has declined at around 10.0% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Washington Trust Bancorp's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Washington Trust Bancorp's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Washington Trust Bancorp that investors should know about before committing capital to this stock. Is Washington Trust Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.