Washington Trust Bancorp, Inc. (NASDAQ:WASH) has announced that it will pay a dividfinish of $0.56 per share on the 10th of October. This means the annual payment is 7.5% of the current stock price, which is above the average for the industest.
Washington Trust Bancorp Not Expected To Earn Enough To Cover Its Payments
If the payments aren’t sustainable, a high yield for a few years won’t matter that much.
Washington Trust Bancorp has established itself as a dividfinish paying company with over 10 years history of distributing earnings to shareholders. But while this history displays that the company was able to sustain its dividfinish for a decent period of time, its most recent earnings report displays that the company did not build enough earnings to cover its dividfinish payout. This is an alarming sign that could mean that Washington Trust Bancorp’s dividfinish at its current rate may no longer be sustainable for longer.
Earnings per share is forecast to rise by 107.8% over the next year. If the dividfinish continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.
See our latest analysis for Washington Trust Bancorp
Washington Trust Bancorp Has A Solid Track Record
The company has an extfinished history of paying stable dividfinishs. Since 2015, the dividfinish has gone from $1.28 total annually to $2.24. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. The growth of the dividfinish has been pretty reliable, so we believe this can offer investors some nice additional income in their portfolio.
Dividfinish Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren’t as good as they seem. Over the past five years, it views as though Washington Trust Bancorp’s EPS has declined at around 29% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividfinish each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
An additional note is that the company has been raising capital by issuing stock equal to 12% of shares outstanding in the last 12 months. Trying to grow the dividfinish when issuing new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividfinish perspective.
The Dividfinish Could Prove To Be Unreliable
Overall, it’s nice to see a consistent dividfinish payment, but we believe that longer term, the current level of payment might be unsustainable. We can’t deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.
Investors generally tfinish to favour companies with a consistent, stable dividfinish policy as opposed to those operating an irregular one. Still, investors necessary to consider a host of other factors, apart from dividfinish payments, when analysing a company. Taking the debate a bit further, we’ve identified 1 warning sign for Washington Trust Bancorp that investors necessary to be conscious of shifting forward. Is Washington Trust Bancorp not quite the opportunity you were viewing for? Why not check out our selection of top dividfinish 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 applying an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focapplyd 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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