Western Union (NYSE:WU) Has Announced A Dividend Of $0.235

The board of The Western Union Company (NYSE:WU) has announced that it will pay a dividend on the 30th of June, with investors receiving $0.235 per share. This means the annual payment is 8.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Western Union

Western Union's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Western Union's dividend was only 47% of earnings, however it was paying out 124% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 12.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 56%, which is comfortable for the company to continue in the future.

Western Union Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.94. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Western Union has impressed us by growing EPS at 22% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Western Union could prove to be a strong dividend payer.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Western Union is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Western Union (of which 2 shouldn't be ignored!) you should know about. Is Western Union 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.