Is It Smart To Buy Washington Trust Bancorp, Inc. (NASDAQ:WASH) Before It Goes Ex-Dividend?
Washington Trust Bancorp, Inc. (NASDAQ:WASH) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Washington Trust Bancorp investors that purchase the stock on or after the 31st of March will not receive the dividend, which will be paid on the 13th of April.
The company's upcoming dividend is US$0.56 a share, following on from the last 12 months, when the company distributed a total of US$2.24 per share to shareholders. Looking at the last 12 months of distributions, Washington Trust Bancorp has a trailing yield of approximately 6.2% on its current stock price of $36.09. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Washington Trust Bancorp
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Washington Trust Bancorp paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Washington Trust Bancorp earnings per share are up 9.4% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Washington Trust Bancorp has lifted its dividend by approximately 9.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Washington Trust Bancorp? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
However if you're still interested in Washington Trust Bancorp as a potential investment, you should definitely consider some of the risks involved with Washington Trust Bancorp. Every company has risks, and we've spotted 1 warning sign for Washington Trust Bancorp you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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