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WesBanco, Inc. (NASDAQ:WSBC) will increase its dividend on the 2nd of January to $0.36, which is 2.9% higher than last year's payment from the same period of $0.35. This will take the dividend yield to an attractive 5.1%, providing a nice boost to shareholder returns.
See our latest analysis for WesBanco
WesBanco's Dividend Forecasted To Be Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having distributed dividends for at least 10 years, WesBanco has a long history of paying out a part of its earnings to shareholders. Based on WesBanco's last earnings report, the payout ratio is at a decent 50%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share is forecast to fall by 8.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 56% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
WesBanco Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.72 in 2013, and the most recent fiscal year payment was $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 2.4% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
WesBanco 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. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.