The board of Western New England Bancorp, Inc. (NASDAQ:WNEB) has announced that it will pay a dividend on the 22nd of May, with investors receiving $0.07 per share. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Western New England Bancorp

Western New England Bancorp's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Western New England Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Western New England Bancorp's payout ratio of 47% is a good sign as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 5.4%. If the dividend continues on this path, the future payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was $0.39, compared to the most recent full-year payment of $0.28. This works out to be a decline of approximately 3.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, Western New England Bancorp's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, we think Western New England Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Western New England Bancorp that you should be aware of before investing. Is Western New England Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.