Webster Financial (NYSE:WBS) Is Due To Pay A Dividend Of $0.40

The board of Webster Financial Corporation (NYSE:WBS) has announced that it will pay a dividend on the 17th of February, with investors receiving $0.40 per share. This means that the annual payment will be 3.2% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Webster Financial

Webster Financial's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Webster Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 43%, which means that Webster Financial would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 118.9% over the next 3 years. Analysts estimate the future payout ratio will be 25% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Webster Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.40 in 2013 to the most recent total annual payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. 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 Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Webster Financial has grown earnings per share at 6.1% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We should note that Webster Financial has issued stock equal to 92% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Webster Financial Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Webster Financial might even raise payments in the future. 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.

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. For instance, we've picked out 1 warning sign for Webster Financial that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.