Western Alliance Bancorporation (NYSE:WAL) Will Pay A Larger Dividend Than Last Year At $0.36

The board of Western Alliance Bancorporation (NYSE:WAL) has announced that it will be increasing its dividend by 2.9% on the 26th of August to $0.36, up from last year's comparable payment of $0.35. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.

Check out our latest analysis for Western Alliance Bancorporation

Western Alliance Bancorporation's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Western Alliance Bancorporation is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. While it has a shorter history of paying out dividends, Western Alliance Bancorporation's payout ratio of 15% is a great sign for current shareholders, as this means that earnings greatly cover dividends.

Over the next year, EPS is forecast to expand by 38.7%. If the dividend continues along recent trends, we estimate the future payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

Western Alliance Bancorporation Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2019, the annual payment back then was $1.00, compared to the most recent full-year payment of $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Western Alliance Bancorporation has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Western Alliance Bancorporation has seen EPS rising for the last five years, at 27% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Western Alliance Bancorporation Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Western Alliance Bancorporation is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Western Alliance Bancorporation that investors should take into consideration. 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.