Webster Financial Corporation (NYSE:WBS) has announced that it will pay a dividend of $0.40 per share on the 12th of November. This means the dividend yield will be fairly typical at 3.1%.

View our latest analysis for Webster Financial

Webster Financial's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Webster Financial has a long history of paying out a part of its earnings to shareholders. Based on Webster Financial's last earnings report, the payout ratio is at a decent 36%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 61.8% over the next 3 years. Analysts estimate the future payout ratio will be 26% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Webster Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.60 in 2014, and the most recent fiscal year payment was $1.60. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Webster Financial hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Webster Financial could always pay out a higher proportion of earnings to increase shareholder returns.

Webster Financial Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Webster Financial that investors should take into consideration. Is Webster Financial not quite the opportunity you were looking for? Why not check out 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.