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 16th of May, with investors receiving $0.40 per share. This means that the annual payment will be 3.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Webster Financial

Webster Financial's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, Webster Financial has a long history of paying out a part of its earnings to shareholders. Based on Webster Financial's last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 32.5% over the next 3 years. The future payout ratio could be 26% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Webster Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.60 in 2014, and the most recent fiscal year payment was $1.60. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Webster Financial May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.8% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Webster Financial could always pay out a higher proportion of earnings to increase shareholder returns.

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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Webster Financial that investors should take into consideration. Is Webster Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.