Canadian Western Bank's (TSE:CWB) dividend will be increasing from last year's payment of the same period to CA$0.32 on 5th of January. This makes the dividend yield about the same as the industry average at 5.3%.
Canadian Western Bank's Earnings Will Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Having distributed dividends for at least 10 years, Canadian Western Bank has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Canadian Western Bank's payout ratio of 36% is a good sign as this means that earnings decently cover dividends.
The next 3 years are set to see EPS grow by 24.9%. Analysts estimate the future payout ratio will be 35% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Canadian Western Bank Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.60 in 2012 to the most recent total annual payment of CA$1.28. This means that it has been growing its distributions at 7.9% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Canadian Western Bank has been growing its earnings per share at 6.3% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Canadian Western Bank Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Canadian Western Bank has 2 warning signs (and 1 which can't be ignored) we think 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.
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