Stock Analysis
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Is It Smart To Buy Walker & Dunlop, Inc. (NYSE:WD) Before It Goes Ex-Dividend?
Walker & Dunlop, Inc. (NYSE:WD) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 19th of February in order to be eligible for this dividend, which will be paid on the 11th of March.
Walker & Dunlop's upcoming dividend is US$0.50 a share, following on from the last 12 months, when the company distributed a total of US$2.00 per share to shareholders. Looking at the last 12 months of distributions, Walker & Dunlop has a trailing yield of approximately 2.0% on its current stock price of $100.36. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Walker & Dunlop has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Walker & Dunlop
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. Walker & Dunlop paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Walker & Dunlop paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Walker & Dunlop's earnings have been skyrocketing, up 24% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Walker & Dunlop has delivered 26% dividend growth per year on average over the past three years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Has Walker & Dunlop got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Walker & Dunlop looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Walker & Dunlop looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Walker & Dunlop has 3 warning signs we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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What are the risks and opportunities for Walker & Dunlop?
Walker & Dunlop, Inc., through its subsidiaries, originates, sells, and services a range of multifamily and other commercial real estate financing products and services for owners and developers of real estate in the United States.
Rewards
Trading at 32.6% below our estimate of its fair value
Earnings are forecast to grow 10.03% per year
Risks
Shareholders have been diluted in the past year
Further research on
Walker & Dunlop
This article by Simply Wall St is general in nature. 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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About NYSE:WD
Walker & Dunlop
Walker & Dunlop, Inc., through its subsidiaries, originates, sells, and services a range of multifamily and other commercial real estate financing products and services for owners and developers of real estate in the United States.
Fair value second-rate dividend payer.
