Wells Fargo (NYSE:WFC) Will Pay A Larger Dividend Than Last Year At $0.45

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2 days ago

Wells Fargo & Company's (NYSE:WFC) dividend will be increasing from last year's payment of the same period to $0.45 on 1st of September. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.
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Wells Fargo's Dividend Forecasted To Be Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Wells Fargo has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Wells Fargo's last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, EPS is forecast to rise by 24.4% over the next 3 years. The future payout ratio could be 30% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
View our latest analysis for Wells Fargo
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $1.40 in 2015, and the most recent fiscal year payment was $1.80. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year 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.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Wells Fargo has seen EPS rising for the last five years, at 56% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like Wells Fargo's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Is Wells Fargo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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