Waterstone Financial (NASDAQ:WSBF) Is Due To Pay A Dividend Of US$0.20

The board of Waterstone Financial, Inc. (NASDAQ:WSBF) has announced that it will pay a dividend on the 2nd of August, with investors receiving US$0.20 per share. Based on this payment, the dividend yield will be 7.5%, which is fairly typical for the industry.

View our latest analysis for Waterstone Financial

Waterstone Financial Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Waterstone Financial was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 48.1% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 126%, which is definitely a bit high to be sustainable going forward.

Waterstone Financial's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the first annual payment was US$0.20, compared to the most recent full-year payment of US$1.30. This means that it has been growing its distributions at 26% per annum over that time. Waterstone Financial has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Waterstone Financial has been growing its earnings per share at 17% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Waterstone Financial's Dividend

Overall, we like to see the dividend staying consistent, and we think Waterstone Financial might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Waterstone Financial (of which 1 is a bit concerning!) 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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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.