Waterstone Financial's (NASDAQ:WSBF) Dividend Will Be $0.20

Waterstone Financial, Inc. (NASDAQ:WSBF) will pay a dividend of $0.20 on the 2nd of May. The dividend yield will be 8.6% based on this payment which is still above the industry average.

See our latest analysis for Waterstone Financial

Waterstone Financial Will Pay Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Waterstone Financial has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Based on Waterstone Financial's last earnings report, the payout ratio is at a decent 90%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years is set to see EPS grow by 64.2%. On the other hand, analysts expect the 3-year future payout ratio to reach 104%, which probably can't continue without putting some pressure on the balance sheet.

Waterstone Financial's Dividend Has Lacked Consistency

Waterstone Financial has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of $0.20 in 2014 to the most recent total annual payment of $1.30. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Waterstone Financial's EPS has declined at around 2.1% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Waterstone Financial's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Waterstone Financial is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for Waterstone Financial that you should be aware of before investing. Is Waterstone Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.