Yahoo Finance Should You Buy Washington Federal, Inc. (NASDAQ:WAFD) For Its Upcoming Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Washington Federal, Inc. (NASDAQ:WAFD) is about to go ex-dividend in just 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Washington Federal's shares on or after the 23rd of February, you won't be eligible to receive the dividend, when it is paid on the 10th of March.
The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$0.96 to shareholders. Based on the last year's worth of payments, Washington Federal has a trailing yield of 2.6% on the current stock price of $36.89. If you buy this business for its dividend, you should have an idea of whether Washington Federal's dividend is reliable and sustainable. As a result, readers should always check whether Washington Federal has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Washington Federal
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Washington Federal has a low and conservative payout ratio of just 19% of its income after tax.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. For this reason, we're glad to see Washington Federal's earnings per share have risen 14% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Washington Federal has lifted its dividend by approximately 12% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
From a dividend perspective, should investors buy or avoid Washington Federal? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Washington Federal ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Washington Federal has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Washington Federal you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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