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The board of Western Alliance Bancorporation (NYSE:WAL) has announced that the dividend on 29th of November will be increased to $0.38, which will be 2.7% higher than last year's payment of $0.37 which covered the same period. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns.
See our latest analysis for Western Alliance Bancorporation
Western Alliance Bancorporation's Earnings Will Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Western Alliance Bancorporation has a good history of paying out dividends, with its current track record at 5 years. While past data isn't a guarantee for the future, Western Alliance Bancorporation's latest earnings report puts its payout ratio at 23%, showing that the company can pay out its dividends comfortably.
Looking forward, EPS is forecast to rise by 82.3% over the next 3 years. Analysts forecast the future payout ratio could be 15% over the same time horizon, which is a number we think the company can maintain.
Western Alliance Bancorporation Is Still Building Its Track Record
Western Alliance Bancorporation's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2019, the annual payment back then was $1.00, compared to the most recent full-year payment of $1.48. This means that it has been growing its distributions at 8.2% per annum over that time. Western Alliance Bancorporation has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Western Alliance Bancorporation has seen EPS rising for the last five years, at 6.4% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.