Do These 3 Checks Before Buying Washington Trust Bancorp, Inc. (NASDAQ:WASH) For Its Upcoming Dividend

It looks like Washington Trust Bancorp, Inc. (NASDAQ:WASH) is about to go ex-dividend in the next three 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 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. Thus, you can purchase Washington Trust Bancorp's shares before the 1st of April in order to receive the dividend, which the company will pay on the 10th of April.

The company's upcoming dividend is US$0.56 a share, following on from the last 12 months, when the company distributed a total of US$2.24 per share to shareholders. Calculating the last year's worth of payments shows that Washington Trust Bancorp has a trailing yield of 6.9% on the current share price of US$32.64. If you buy this business for its dividend, you should have an idea of whether Washington Trust Bancorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

View our latest analysis for Washington Trust Bancorp

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Washington Trust Bancorp's earnings per share have fallen at approximately 7.4% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Washington Trust Bancorp has increased its dividend at approximately 5.1% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Washington Trust Bancorp is already paying out 82% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

To Sum It Up

Should investors buy Washington Trust Bancorp for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Wondering what the future holds for Washington Trust Bancorp? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.