Last update on 2024-06-27

Westamerica Bancorp (WABC) - Dividend Analysis (Final Score: 5/8)

Discover the dividend stability and performance of Westamerica Bancorp (WABC) with our detailed 8-criteria scoring analysis. Final Score: 5/8.

Short Analysis - Dividend Score: 5

We're running Westamerica Bancorp (WABC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Westamerica Bancorp (WABC) using an 8-criteria scoring system reveals a mixed performance, reflected in a dividend score of 5. The current dividend yield of 1.4891% is lower than the industry average of 2.76%, and the company experienced a significant dividend cut in 2023. The average annual Dividend Growth Rate over the past 20 years has been inconsistent and below the desired 5%. However, the average payout ratio of 50.26% over two decades suggests sustainability. Dividends were mostly covered by earnings and cash flow, though recent figures show some instability. Moreover, WABC's track record of paying dividends for over 25 years and conducting stock repurchases is generally positive, albeit with a sharp decrease in dividends in 2023.

Insights for Value Investors Seeking Stable Income

Investors should exercise caution with Westamerica Bancorp as a potential investment. The significant reduction in dividends in 2023 is concerning and warrants a deeper dive into the company's financials and strategic decisions. While the company has shown overall sustainability and a history of returning value to shareholders, the recent trends suggest potential challenges ahead. It may be worth monitoring WABC closely but consider diversification to mitigate risks.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price. It is a crucial measure for investors who seek income from their investments in the form of dividends.

Westamerica Bancorp's current dividend yield stands at 1.4891%, which is lower than the industry average of 2.76%. Historically, Westamerica Bancorp has maintained a relatively stable dividend yield, often outperforming the industry average in years like 2007 (3.0527%) and 2010 (2.596%). The recent decline in dividend yield can be attributed to a halving of dividends per share to 0.84 in 2023, coupled with a consistently stable stock price, which suggests a contraction in willingness or ability to return capital to shareholders. From an investor perspective, this recent trend is concerning as the dividend yield is an important metric for gauging income-generating potential, particularly for income-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth of a company's dividend payments over a specific period. A DGR higher than 5% over the past 20 years indicates not only consistent performance and commitment to returning value to shareholders but also suggests financial stability and growth potential.

The historical dividend per share for Westamerica Bancorp (WABC) shows a mixed performance. Over the last 20 years, while there have been years with positive growth, notable declines are also observed, such as -50% in 2023 and 0.6098% in 2021. An average dividend ratio of approximately 0.69% over these years is relatively low. While some years exceeded the 5% mark, the inconsistency and decline in recent years indicate that WABC’s DGR is below the desired 5% threshold, which is not a positive trend and raises concerns about its continued ability to pay increasing dividends.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Average Payout Ratio criterion evaluates how much of a company's earnings are paid out as dividends, which is important for sustainability.

Westamerica Bancorp (WABC) exhibits an average payout ratio of approximately 50.26% over the last 20 years, which is comfortably below the threshold of 65%. However, some years exhibit higher ratios, including 2008 (68.00%) and 2017 (82.92%), which could signal occasional instability in payout policies. Nonetheless, the long-term average being low suggests a generally sustainable and prudent dividend strategy. This trend is overall positive.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings is vital for the sustainability of dividend payments. If earnings per share (EPS) significantly exceed dividends per share, it suggests that the company is not overextending itself by paying out more than it earns. This can help ensure that dividends can be maintained or even increased over time without compromising the company's financial health.

Westamerica Bancorp (WABC) has shown a general trend where dividends are consistently covered by its earnings. The coverage ratio above 1 indicates that EPS is higher than dividends per share, ensuring that dividends are paid from earnings rather than debt or reserves. From 2013 to 2017, the coverage ratio shows a slight uptick year after year from around 0.60 to over 0.83 by 2017, indicating increasing comfort in covering dividend payouts. Although it slightly declines post-2017, the ratios till 2022 remain relatively healthy, showcasing sustainability in their payout policy. However, the sharp drop to 0.13865962363816442 in 2023 is concerning; EPS is significantly higher yet doesn't correlate with a consistent dividend growth policy, which might affect investor perception negatively. On balance, while overall trends indicate a cautious approach toward dividend promises, recent fluctuations call for a deeper dive into what might be causing such aberrations in coverage ratios.

Dividends Well Covered by Cash Flow?

Determining if dividends are well covered by cash flow involves comparing a company's free cash flow (money remaining after operating expenses and capital expenditures) to its dividend payouts. This ratio indicates the sustainability of dividend distributions and the company's ability to generate sufficient cash flow to cover those payouts. It reflects financial health and reliability for dividend investors.

Over the years, Westamerica Bancorp's ability to cover its dividend payouts with free cash flow has seen fluctuations. In the early 2000s, particularly from 2003 to 2007, the company's dividend coverage by free cash flow ranged from approximately 0.297 to 0.380. This suggests that free cash flow was more than adequate to cover dividends, though not excessively so. The ratio briefly dipped to its lowest in 2013 at 0.479, indicating a modest cushion over dividends, but quickly improved by 2015, surpassing 0.59. Despite some volatility, the trend generally reflects that the company has managed to maintain a fairly robust coverage of its dividends. A significant peak was noted in 2019 with a coverage of approximately 0.572, before dipping to near its lowest ratio in the observed period at 0.292 in 2023. This recent dip implies potential stress in sustaining dividend payouts solely from free cash flow, prompting a cautious outlook for future periods. Overall, while the trend shows periods of strong and weak coverage, the recent drop necessitates closer monitoring and possibly indicates underlying financial challenges.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

The data provided for Westamerica Bancorp (WABC) indicates that the dividend per share for 2003-2022 ranged from $1.00 to $1.68. However, there is a noticeable drop in 2023 where the dividend per share fell to $0.84, representing a decline of 50%, which is significantly more than 20%. This trend is concerning for income-seeking investors who prioritize stability. Over the first 19 years, dividends showed steady, albeit modest growth, which is a positive sign. However, the sharp decrease in 2023 disrupts that stability. This could be a red flag signaling potential concerns in the company’s financial health or a strategic shift that needs deeper investigation.

Dividends Paid for Over 25 Years?

This criterion assesses whether Westamerica Bancorp has consistently paid dividends for over 25 years, indicating a strong commitment to returning value to shareholders.

The data indicates that Westamerica Bancorp has paid dividends consistently from 1998 to 2023. The dividend per share has increased from $0.52 in 1998 to a peak of $1.68 in 2022, demonstrating a solid upward trend. However, there is a significant drop in 2023 to $0.84, which is concerning. Consistent dividend payments over such a long period are generally positive as they represent financial stability and a commitment to shareholders. The drastic drop in the dividend in 2023 might indicate financial strain or a redirection of company funds, and further investigation would be necessary to understand this anomaly in an otherwise strong trend.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Westamerica Bancorp (WABC) and why it is important to consider

A reliable stock repurchase program over the past 20 years indicates consistent capital return to shareholders. This is important for investors looking for long-term appreciation, as it shows the company's commitment to increasing shareholder value by reducing outstanding shares, which can help boost earnings per share (EPS) and support share price growth.