Why It Might Not Make Sense To Buy WesBanco, Inc. (NASDAQ:WSBC) For Its Upcoming Dividend

WesBanco, Inc. (NASDAQ:WSBC) stock is about to trade ex-dividend in three days. You will need to purchase shares before the 11th of March to receive the dividend, which will be paid on the 1st of April.

WesBanco's upcoming dividend is US$0.33 a share, following on from the last 12 months, when the company distributed a total of US$1.28 per share to shareholders. Last year's total dividend payments show that WesBanco has a trailing yield of 3.8% on the current share price of $35.04. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for WesBanco

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. WesBanco paid out more than half (72%) of its earnings last year, which is a regular payout ratio for most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that WesBanco's earnings are down 3.8% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, WesBanco has lifted its dividend by approximately 9.0% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Is WesBanco worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that in mind though, if the poor dividend characteristics of WesBanco don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 1 warning sign for WesBanco and you should be aware of it before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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