Wells Fargo (NYSE:WFC) Is Paying Out A Larger Dividend Than Last Year
Wells Fargo & Company (NYSE:WFC) will increase its dividend from last year's comparable payment on the 1st of September to $0.35. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.
See our latest analysis for Wells Fargo
Wells Fargo's Dividend Forecasted To Be Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Wells Fargo has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 30%, which means that Wells Fargo would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 32.0%. The future payout ratio could be 39% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.98 in 2013 to the most recent total annual payment of $1.40. This means that it has been growing its distributions at 3.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth May Be Hard To Achieve
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Wells Fargo's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Wells Fargo has the option to increase the payout ratio to return more cash to shareholders.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Wells Fargo that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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