Important news for shareholders and potential investors in First Financial Northwest Inc (NASDAQ:FFNW): The dividend payment of US$0.08 per share will be distributed into shareholder on 21 September 2018, and the stock will begin trading ex-dividend at an earlier date, 06 September 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at First Financial Northwest’s most recent financial data to examine its dividend characteristics in more detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does First Financial Northwest fare?
First Financial Northwest has a trailing twelve-month payout ratio of 20.9%, which means that the dividend is covered by earnings. Going forward, analysts expect FFNW’s payout to increase to 28.8% of its earnings, which leads to a dividend yield of 1.9%. However, EPS is forecasted to fall to $1.35 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from First Financial Northwest have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, First Financial Northwest generates a yield of 1.8%, which is on the low-side for Banks stocks.
Whilst there are few things you may like about First Financial Northwest from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for FFNW’s future growth? Take a look at our free research report of analyst consensus for FFNW’s outlook.
- Valuation: What is FFNW worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FFNW is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.