The board of Westamerica Bancorporation (NASDAQ:WABC) has announced that the dividend on 16th of May will be increased to $0.46, which will be 4.5% higher than last year's payment of $0.44 which covered the same period. This makes the dividend yield about the same as the industry average at 3.6%.

We've discovered 1 warning sign about Westamerica Bancorporation. View them for free.

Westamerica Bancorporation's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Westamerica Bancorporation has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Westamerica Bancorporation's payout ratio of 35% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to fall by 10.9%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 41%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

See our latest analysis for Westamerica Bancorporation

Westamerica Bancorporation Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $1.52, compared to the most recent full-year payment of $1.76. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Westamerica Bancorporation has impressed us by growing EPS at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Westamerica Bancorporation's Dividend

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. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Westamerica Bancorporation that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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