William Penn Bancorporation (NASDAQ:WMPN) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, William Penn Bancorporation investors that purchase the stock on or after the 28th of January will not receive the dividend, which will be paid on the 10th of February.
The company's next dividend payment will be US$0.03 per share, and in the last 12 months, the company paid a total of US$0.12 per share. Based on the last year's worth of payments, William Penn Bancorporation stock has a trailing yield of around 1.0% on the current share price of $12.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. William Penn Bancorporation distributed an unsustainably high 150% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see William Penn Bancorporation earnings per share are up 4.6% per annum over the last five years.
We'd also point out that William Penn Bancorporation issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, William Penn Bancorporation has increased its dividend at approximately 10% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
From a dividend perspective, should investors buy or avoid William Penn Bancorporation? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 150% of last year's earnings. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with William Penn Bancorporation. In terms of investment risks, we've identified 1 warning sign with William Penn Bancorporation and understanding them should be part of your investment process.
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.
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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.