The board of Webster Financial Corporation (NYSE:WBS) has announced that it will pay a dividend on the 23rd of November, with investors receiving US$0.40 per share. Based on this payment, the dividend yield on the company's stock will be 2.9%, which is an attractive boost to shareholder returns.
Webster Financial's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Webster Financial was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 7.6%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Webster Financial Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.04, compared to the most recent full-year payment of US$1.60. This implies that the company grew its distributions at a yearly rate of about 45% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Webster Financial has seen EPS rising for the last five years, at 13% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
We Really Like Webster Financial's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 9 Webster Financial analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
What are the risks and opportunities for Webster Financial?
Trading at 54.6% below our estimate of its fair value
Earnings are forecast to grow 28.7% per year
Earnings grew by 57.6% over the past year
Shareholders have been substantially diluted in the past year
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.
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Webster Financial Corporation operates as the bank holding company for Webster Bank, National Association that provides a range of banking, investment, and financial services to individuals, families, and businesses in the United States.
Flawless balance sheet established dividend payer.