Washington Trust Bancorp (NASDAQ:WASH) Will Pay A Larger Dividend Than Last Year At US$0.54

The board of Washington Trust Bancorp, Inc. (NASDAQ:WASH) has announced that it will be increasing its dividend on the 7th of January to US$0.54. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

View our latest analysis for Washington Trust Bancorp

Washington Trust Bancorp's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Washington Trust Bancorp was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to fall by 10.5%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 59%, which is comfortable for the company to continue in the future.

Washington Trust Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was US$0.88, compared to the most recent full-year payment of US$2.16. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Washington Trust Bancorp has been growing its earnings per share at 10% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Washington Trust Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Washington Trust Bancorp is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Washington Trust Bancorp has 2 warning signs (and 1 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.