Shares of NorthWestern Corporation (NYSE:NWE) will begin trading ex-dividend in 2 days. To qualify for the dividend check of US$0.55 per share, investors must have owned the shares prior to 13 September 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. 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 NorthWestern’s most recent financial data to examine its dividend characteristics in more detail.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
Does NorthWestern pass our checks?
NorthWestern has a trailing twelve-month payout ratio of 56.7%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 68.5%, leading to a dividend yield of around 3.8%. However, EPS is forecasted to fall to $3.45 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of NWE it has increased its DPS from $1.32 to $2.2 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes NWE a true dividend rockstar.
Compared to its peers, NorthWestern generates a yield of 3.6%, which is high for Integrated Utilities stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, NorthWestern is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for NWE’s future growth? Take a look at our free research report of analyst consensus for NWE’s outlook.
- Valuation: What is NWE 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 NWE is currently mispriced by the market.
- Other 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.