Be Sure To Check Out Webster Financial Corporation (NYSE:WBS) Before It Goes Ex-Dividend

Readers hoping to buy Webster Financial Corporation (NYSE:WBS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Webster Financial investors that purchase the stock on or after the 12th of May will not receive the dividend, which will be paid on the 22nd of May.

The company's next dividend payment will be US$0.40 per share, and in the last 12 months, the company paid a total of US$1.60 per share. Calculating the last year's worth of payments shows that Webster Financial has a trailing yield of 3.3% on the current share price of US$48.59. If you buy this business for its dividend, you should have an idea of whether Webster Financial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

We've discovered 1 warning sign about Webster Financial. View them for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Webster Financial paying out a modest 27% of its earnings.

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.

View our latest analysis for Webster Financial

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Webster Financial's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Webster Financial has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Is Webster Financial an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent years, although Webster Financial reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Webster Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Webster Financial for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Webster Financial and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.