Last update on 2024-06-27

Washington Federal (WAFD) - Dividend Analysis (Final Score: 7/8)

Comprehensive analysis of Washington Federal (WAFD) dividend policy reveals stability and growth with a high score of 7/8 based on performance and sustainability.

Short Analysis - Dividend Score: 7

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

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 stock price.

Washington Federal's (WAFD) current dividend yield of 3.034% is above the industry average of 2.76%. This positive trend is evident as the dividend yield remained competitive over the past two decades, despite some fluctuations. Notably, years like 2008 and 2003 had yields exceeding 4%, which reflects consistent shareholder return. While the stock price closed at $32.96 in 2023, the dividend per share has gradually increased to $1, evidencing stable and rising dividends. When compared to industry standards, WAFD's yield indicates a strong propensity for returning profits to stockholders.

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

Evaluate if the Dividend Growth Rate of Washington Federal (WAFD) is higher than 5% in the last 20 years and why this metric matters in assessing dividend sustainability and growth potential for investors.

The calculated average dividend growth rate for Washington Federal (WAFD) over the past 20 years is approximately 6.1%. This period includes significant fluctuations, such as a notable drop in 2009, likely influenced by the financial crisis. However, consistent growth over some periods coupled with an overall average exceeding the 5% threshold indicates a positive performance regarding dividend growth. This trend is good as it shows the company's ability to increase shareholder returns over a long period, suggesting a potentially reliable income stream for investors.

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

The payout ratio measures the percentage of earnings distributed as dividends to shareholders. A ratio below 65% is considered healthy.

Washington Federal (WAFD) has an average payout ratio of 37.70% over the past 20 years, which is well below the 65% threshold. This indicates that WAFD has a conservative and sustainable approach to distributing its earnings as dividends, which is generally a good trend. During the 20-year period, there were a few years like 2008 where the payout ratio spiked to 95.80%, likely due to financial instability during the financial crisis, but overall WAFD has maintained a prudent payout policy. This consistency aids in reinforcing investor confidence as it suggests the company is reinvesting a significant portion of its earnings back into the business for future growth and stability.

Dividends Well Covered by Earnings?

One important metric to determine if the dividends are well covered by the earnings is the dividend payout ratio, which can be calculated as dividends per share divided by earnings per share. A lower payout ratio indicates more comfortably covered dividends.

The dividend payout ratio for Washington Federal (WAFD) has varied over the years. It was as low as around 0.19 in 2010, which suggests the dividends were very conservatively covered by the earnings. In contrast, it was as high as about 0.96 in 2008, indicating that nearly all the earnings were being distributed as dividends, reflecting potential distribution strain. Recently, the payout ratio has been hovering around 0.25. Overall, this trend suggests that WAFD generally maintains a conservative strategy with respect to dividend payment, which is positive as it ensures that earnings comfortably cover dividends and contribute to financial resilience.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow ensures that a company generates enough cash to meet dividend payments without financial strain. This is crucial for the sustainability of dividends.

Examining Washington Federal's (WAFD) Free Cashflow and Dividend Payout Amounts from 2003 to 2023, the Dividend covered by Cashflow ratio fluctuates significantly. The lowest ratio is observed in 2009 at 0.135, while the highest is noted in 2003 at 0.516. A ratio above 0.5 generally indicates a healthy coverage. Over the past five years, the coverage has shown some improvements yet remains erratic, peaking in 2021 at approximately 0.49. This inconsistent coverage suggests potential volatility in WAFD's dividend sustainability. For long-term investors looking for stable passive income, this instability could be a red flag and might warrant closer scrutiny of future cash flow projections in comparison to dividend commitments. Adjustments might be necessary if cash flow does not sustainably cover dividends in the long term.

Stable Dividends Since the Company Began Paying Dividends?

Analyze stability in dividend payments, where dividend per share did not drop by more than 20% over the last two decades.

Reviewing Washington Federal's (WAFD) dividend per share over the past 20 years, we observe fluctuations with significant declines particularly noticeable during 2008 and 2009, where dividends dropped sharply by more than 20%. For instance, from 2008 to 2009, the dividend per share fell from 0.68 to 0.2. However, post-2009, WAFD showed a consistent increase in its dividend payouts. Stabilizing and growing dividends post-crisis period indicate a possible focus on strengthening financial health and investor trust. Despite the earlier volatility, the upward trend in later years reflects commitment towards steady dividend payouts, crucial for income-focused investors.

Dividends Paid for Over 25 Years?

Why it is important to consider whether a company has been paying dividends for over 25 years.

Washington Federal has a consistent track record of paying dividends over the last 25 years, as evidenced by the provided data. This is a positive criterion, indicating stability and reliability. The company paid a significantly high dividend per share in 1998 at $0.6289 and reported the highest dividend per share in 2023 at $1. This demonstrates growth and the management’s commitment to returning value to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years serve as a potential indicator of effective capital allocation and shareholder value enhancement.

Washington Federal (WAFD) has shown a relatively consistent strategy of repurchasing shares over the past 20 years. The data demonstrates that they repurchased shares in 13 out of these 20 years, which suggests an intentional approach toward managing their capital structure and returning value to shareholders. This trend appears favorable as it indicates management's confidence in the company’s financial stability and future prospects. The continued reduction in the number of shares, from 87,471,474 in 2006 to 65,192,510 in 2023, further corroborates their commitment to share repurchases. Though the average repurchase rate, standing at -1.0973, might not seem significant, the persistent effort over the years signals a positive trend.