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 8th of April to US$0.54. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Washington Trust Bancorp

Washington Trust Bancorp's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Washington Trust Bancorp's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 13.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 60%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Washington Trust Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.88 in 2012, and the most recent fiscal year payment was US$2.16. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Washington Trust Bancorp has grown earnings per share at 10% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Washington Trust Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. 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 Washington Trust Bancorp 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 yield 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.