Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Western New England Bancorp, Inc. (NASDAQ:WNEB) is about to go ex-dividend in just three days. If you purchase the stock on or after the 11th of August, you won't be eligible to receive this dividend, when it is paid on the 26th of August.

Western New England Bancorp's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Last year's total dividend payments show that Western New England Bancorp has a trailing yield of 3.9% on the current share price of $5.07. 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.

See our latest analysis for Western New England Bancorp

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. Western New England Bancorp paid out a comfortable 47% of its profit last year.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Western New England Bancorp, with earnings per share up 4.5% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Western New England Bancorp's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. Western New England Bancorp is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Should investors buy Western New England Bancorp for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Western New England Bancorp more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 3 warning signs for Western New England Bancorp (1 shouldn't be ignored) you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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