Should Income Investors Look At Northwest Bancshares, Inc. (NASDAQ:NWBI) Before Its Ex-Dividend?
It looks like Northwest Bancshares, Inc. (NASDAQ:NWBI) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Northwest Bancshares' shares before the 3rd of May to receive the dividend, which will be paid on the 15th of May.
The company's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.80 to shareholders. Based on the last year's worth of payments, Northwest Bancshares stock has a trailing yield of around 6.8% on the current share price of $11.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Northwest Bancshares has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Northwest Bancshares
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Northwest Bancshares paid out more than half (72%) of its earnings last year, which is a regular payout ratio for most companies.
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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Northwest Bancshares, with earnings per share up 3.1% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Northwest Bancshares has lifted its dividend by approximately 5.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Northwest Bancshares? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We think there are likely better opportunities out there.
If you're not too concerned about Northwest Bancshares's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 1 warning sign for Northwest Bancshares that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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