There’s A Lot To Like About Webster Financial’s (NYSE:WBS) Upcoming US$0.40 Dividend

Webster Financial Corporation (NYSE:WBS) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Webster Financial’s shares on or after the 3rd of February, you won’t be eligible to receive the dividend, when it is paid on the 17th of February.

The company’s next dividend payment will be US$0.40 per share, on the back of last year when the company paid a total of US$1.60 to shareholders. Last year’s total dividend payments show that Webster Financial has a trailing yield of 3.1% on the current share price of $50.84. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Webster Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Webster Financial paid out a comfortable 43% of its profit last year.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re encouraged by the steady growth at Webster Financial, with earnings per share up 6.1% on average over the last five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Webster Financial has delivered 15% dividend growth per year on average over the past 10 years. 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 Webster Financial? Webster Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Webster Financial appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example – Webster Financial has 1 warning sign we think you should be aware of.

If you’re in the market for strong dividend payers, we recommend checking 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.