William Penn Bancorporation (NASDAQ:WMPN) Will Pay A Dividend Of $0.03

The board of William Penn Bancorporation (NASDAQ:WMPN) has announced that it will pay a dividend of $0.03 per share on the 9th of May. This payment means the dividend yield will be 1.0%, which is below the average for the industry.

View our latest analysis for William Penn Bancorporation

William Penn Bancorporation Will Pay Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

William Penn Bancorporation has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions unfortunately do not guarantee future ones, and William Penn Bancorporation's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is an alarming sign for the sustainability of its dividends, as it may mean that William Penn Bancorporationis pulling cash from elsewhere to keep its shareholders happy.

If the company can't turn things around, EPS could fall by 20.7% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 154%, which is definitely a bit high to be sustainable going forward.

William Penn Bancorporation Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.0614 in 2014, and the most recent fiscal year payment was $0.12. This means that it has been growing its distributions at 6.9% per annum 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 Has Limited Growth Potential

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. Earnings per share has been sinking by 21% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

William Penn Bancorporation's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about William Penn Bancorporation's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

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, William Penn Bancorporation has 2 warning signs (and 1 which shouldn'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 yield dividend stocks.

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