Last update on 2024-06-27

WSFS Financial (WSFS) - Dividend Analysis (Final Score: 6/8)

Comprehensive dividend analysis of WSFS Financial (WSFS) with a final score of 6/8. Understand the performance and stability of their dividend policy.

Short Analysis - Dividend Score: 6

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

WSFS Financial (WSFS) was analyzed based on eight criteria to determine the performance and stability of its dividend policy. The company scored 6 out of 8, indicating a generally favorable outlook. Although WSFS's current dividend yield of 1.3063% is lower than the industry average of 2.76%, historical trends show an upward trajectory in dividends and stock prices. The company has an average annual payout ratio of 34.39%, which is below the benchmark of 65%, indicating financial stability. Dividends are well-covered by earnings, though the fluctuating free cash flow raises some questions about long-term sustainability. WSFS has been paying dividends for over 25 years, demonstrating reliability in returning value to shareholders. Additionally, the firm has shown a commitment to shareholder returns through variable but strategic stock repurchase activities. Overall, WSFS Financial presents a stable, albeit slightly fluctuating, dividend outlook.

Insights for Value Investors Seeking Stable Income

Given the historically increasing dividends, consistent earnings coverage, and reliable dividend history, WSFS Financial (WSFS) shows promise for dividend investors. Though the current yield is below the industry average, the potential for future growth and the stable payout history make it worth considering. Investors should, however, keep an eye on the fluctuating free cash flow, which may impact dividend sustainability in the long term. Overall, it's a solid stock to invest in for dividend seekers looking for stability and long-term growth.

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.

While WSFS Financial's (WSFS) current dividend yield of 1.3063% is lower than the industry average of 2.76%, it is important to note the trend over the past 20 years. Historically, WSFS has had fluctuating dividend yields, with notable lows around 0.3834% in 2004 and highs around 1.8728% in 2009. The recent yields indicate a steady increase, reaching 1.3063% in 2023. Moreover, the stock price has seen significant appreciation over the years, moving from $14.95 in 2003 to $45.93 in 2023. Despite currently being lower than the industry average, the upward trend in dividend yield, alongside increasing dividends per share and higher stock prices, suggests a positive trajectory for WSFS. This divergence from the industry average can sometimes be attributed to the company’s reinvestment strategies or specific growth objectives, which might forego higher immediate payouts to foster long-term growth.

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

Explain the Dividend Growth Rate criterion and why it is important to consider

The dividend growth rate is a measure of how much a company's dividend payments have grown over time. It is crucial because consistent and substantial dividend growth can indicate a company's strong financial health and its commitment to sharing profits with shareholders. A higher-than-average growth rate can make a stock more attractive to dividend investors.

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

The average payout ratio reflects the proportion of earnings paid out as dividends to shareholders. An average payout ratio lower than 65% suggests financial stability.

WSFS Financial's average payout ratio over the last 20 years has been 34.39%, which is significantly lower than the benchmark of 65%. This indicates that WSFS retains a majority of its earnings to reinvest in the business or buffer against economic downturns. While there was a spike in the payout ratio during 2009 (465.12%), likely due to financial crisis-related challenges, the overall trend has remained well within acceptable limits. This is a positive indicator for dividend sustainability and financial prudence, suggesting that WSFS can maintain or potentially increase dividend payouts without compromising its financial health.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings

One vital aspect of dividend sustainability is the payout ratio, which measures what portion of earnings are distributed as dividends. Ideally, a company’s earnings should comfortably cover its dividend payments to ensure financial health and continued capacity to pay dividends in the future. A lower payout ratio signals strong dividend coverage, while a higher payout ratio may indicate that a company is stretching its earnings to meet dividend obligations.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow are an indicator that the company’s dividend payments are sustainable. If dividends are well covered by free cash flow, it suggests the company generates sufficient cash to meet its dividend obligations without compromising other financial commitments. This is essential to assess the reliability and stability of dividend payments in the future.

WSFS Financial's free cash flow fluctuates significantly over the years, with notable peaks in 2022 (472.045 million) and dips like 2020 (7.983 million). At the same time, dividend payout amounts show a more steady increase, reaching 36.742 million by 2023 from 1.583 million in 2003. The dividend coverage ratio by cash flow provides insights into the company's ability to sustain its dividend payouts. This ratio fluctuated wildly, reaching as high as 3.05 in 2020 and as low as 0.052 in 2005. Generally, higher coverage ratios imply a healthy cushion for dividends. However, WSFS Financial seems to have periods where the coverage ratio is unsatisfactory. A sustainable coverage ratio is generally above 1, and anything below indicates that dividends might be paid from volatile or non-recurring cash sources, posing sustainability risks in lean periods. Overall, while there were moments of strong coverage, WSFS Financial's erratic free cash flow raises questions about the long-term reliability of its dividends.

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.

True

Dividends Paid for Over 25 Years?

This criterion assesses whether WSFS Financial has a robust and reliable history of paying dividends for over 25 years.

Analyzing the data, it's evident that WSFS Financial has indeed been paying dividends consistently over the past 25 years, confirming a reliable dividend history. Starting from $0.09 per share in 1998, the dividend per share increased to $0.6 in 2023. This consistent payment not only underscores the firm's solid financial health but also its commitment to delivering shareholder value. The increasing trend in dividend payouts highlights the firm's growth trajectory and its prioritization of returning capital to shareholders. From a long-term investor's perspective, this is a positive sign and instills confidence in the company's dividend sustainability.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate a company's ability to return value to shareholders by reducing the number of outstanding shares, thus potentially increasing earnings per share.

WSFS Financial has shown variable stock repurchase activity over the past 20 years. The share count decreased consistently from 2003 to 2008, with active buybacks. After a period of increased share issuance post-2009, likely due to capital raising efforts or acquisition-related issuance, buyback activities resumed in 2018 and 2021, demonstrating renewed commitment to shareholder returns. Despite periods of dilution, the average rate of repurchase activity is 5.5832, showing a long-term trend towards returning capital to shareholders. This mixed history indicates a tempered but strategic use of repurchases, which can be interpreted as a cautious but shareholder-friendly approach.