Western New England Bancorp (NASDAQ:WNEB) Is Increasing Its Dividend To US$0.06

Western New England Bancorp, Inc. (NASDAQ:WNEB) will increase its dividend on the 23rd of February to US$0.06, which is 20% higher than last year. Even though the dividend went up, the yield is still quite low at only 2.2%.

See our latest analysis for Western New England Bancorp

Western New England Bancorp's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Western New England Bancorp's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 15.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 26%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from US$0.54 in 2012 to the most recent annual payment of US$0.20. The dividend has shrunk at around 9.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Western New England Bancorp has impressed us by growing EPS at 33% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Western New England Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Western New England Bancorp (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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