It looks like Waterstone Financial, Inc. (NASDAQ:WSBF) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Waterstone Financial's shares before the 7th of October to receive the dividend, which will be paid on the 2nd of November.

The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$1.60 per share. Based on the last year's worth of payments, Waterstone Financial stock has a trailing yield of around 6.3% on the current share price of $20.53. If you buy this business for its dividend, you should have an idea of whether Waterstone Financial's dividend is reliable and sustainable. As a result, readers should always check whether Waterstone Financial has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Waterstone Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Waterstone Financial has a low and conservative payout ratio of just 18% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Waterstone Financial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Waterstone Financial's earnings have been skyrocketing, up 47% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Waterstone Financial has delivered an average of 26% per year annual increase in its dividend, based on the past eight years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Waterstone Financial worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Waterstone Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while Waterstone Financial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 2 warning signs we've spotted with Waterstone Financial (including 1 which shouldn't be ignored).

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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