Western Union (NYSE:WU) Is Due To Pay A Dividend Of $0.235

The board of The Western Union Company (NYSE:WU) has announced that it will pay a dividend on the 29th of September, with investors receiving $0.235 per share. This means the annual payment is 7.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Western Union

Western Union's Dividend Is Well Covered By Earnings

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 108% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to fall by 10.4%. If the dividend continues along recent trends, we estimate the payout ratio could be 56%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Western Union 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 $0.94. This means that it has been growing its distributions at 8.9% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. We are encouraged to see that Western Union has grown earnings per share at 15% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Western Union's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Western Union's payments, as there could be some issues with sustaining them into the future. While Western Union is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Western Union (of which 3 don't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.