The board of Webster Financial Corporation (NYSE:WBS) has announced that it will pay a dividend of $0.40 per share on the 22nd of May. Based on this payment, the dividend yield will be 3.2%, which is fairly typical for the industry.

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Webster Financial's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

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 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 51.3%. The future payout ratio could be 26% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Check out our latest analysis for Webster Financial

Webster Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.80 in 2015 to the most recent total annual payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Webster Financial Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Webster Financial has seen EPS rising for the last five years, at 5.6% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Webster Financial's prospects of growing its dividend payments in the future.

We Really Like Webster Financial's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Webster Financial that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.