Western New England Bancorp (NASDAQ:WNEB) Has Affirmed Its Dividend Of $0.07

Western New England Bancorp, Inc. (NASDAQ:WNEB) will pay a dividend of $0.07 on the 21st of August. Based on this payment, the dividend yield will be 3.3%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Western New England Bancorp's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Western New England Bancorp

Western New England Bancorp's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, Western New England Bancorp has a long history of paying out a part of its earnings to shareholders. Based on Western New England Bancorp's last earnings report, the payout ratio is at a decent 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to fall by 3.3%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 47%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was $0.29, compared to the most recent full-year payment of $0.28. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown at around 4.0% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Western New England Bancorp's Dividend

Overall, we think Western New England Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Western New England Bancorp (1 shouldn't be ignored!) that you should be aware of before investing. 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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