Wells Fargo & Company (NYSE:WFC) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Wells Fargo & Company (NYSE:WFC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Wells Fargo's shares on or after the 9th of May, you won't be eligible to receive the dividend, when it is paid on the 1st of June.

The company's next dividend payment will be US$0.35 per share, and in the last 12 months, the company paid a total of US$1.40 per share. Looking at the last 12 months of distributions, Wells Fargo has a trailing yield of approximately 2.3% on its current stock price of US$59.94. If you buy this business for its dividend, you should have an idea of whether Wells Fargo's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Wells Fargo

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Wells Fargo's payout ratio is modest, at just 28% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Wells Fargo, with earnings per share up 3.1% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Wells Fargo has increased its dividend at approximately 1.6% a year on average.

Final Takeaway

Is Wells Fargo an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Wells Fargo looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Wells Fargo for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Wells Fargo you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.