Canadian Western Bank (TSE: CWB) has announced that it will pay a dividend of C $ 0.29 per share on June 24. This means that the dividend yield will be fairly typical at 3.2%.
Check out our latest analysis for Canadian Western Bank
Canadian Western Bank payment has strong income coverage
While it’s always good to see a solid dividend yield, we also need to consider whether the payout is achievable. Based on the latest payment, Canadian Western Bank was earning enough to cover the dividend, but free cash flow was not positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is expected to increase by 10.5%. If the dividend continues according to recent trends, we estimate that the payout ratio will be 35%, which is in a range that makes us comfortable with the sustainability of the dividend.
Canadian Western Bank has a solid track record
The company has a strong history of paying dividends with very little fluctuation. The dividend went from CA $ 0.44 in 2011 to the last annual payment of CA $ 1.16. This means that he increased his distributions by 10% per year during this period. So, dividends have grown quite quickly, and what is even more impressive, they haven’t seen any noticeable decline during that time.
The dividend has growth potential
Investors in the company will be happy to receive dividends for some time. It is encouraging to see that the Canadian Western Bank has increased its earnings per share by 6.4% per year over the past five years. Canadian Western Bank certainly has the potential to increase its dividend in the future with earnings on an uptrend and a low payout ratio.
In summary, while it is good to see that the dividend has not been reduced, we are a little cautious about the payments from the Canadian Western Bank as there could be issues maintaining them in the future. While Canadian Western Bank earns enough to cover the dividend, we are generally not impressed with its prospects for the future. We would probably look elsewhere for an income investment.
Investors generally tend to favor companies with a consistent and stable dividend policy over those that operate irregularly. However, there are other things for investors to consider when analyzing stock performance. For example, we have chosen 1 warning sign for the Canadian West Bank that investors should be aware of before committing capital to this stock. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
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