Northwest Bancshares (NASDAQ:NWBI) Could Be A Buy For Its Upcoming Dividend
Northwest Bancshares, Inc. (NASDAQ:NWBI) stock is about to trade ex-dividend in 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. Therefore, if you purchase Northwest Bancshares' shares on or after the 4th of May, you won't be eligible to receive the dividend, when it is paid on the 16th 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 6.2% on the current share price of $12.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Northwest Bancshares can afford its dividend, and if the dividend could grow.
View 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 72% of its earnings to investors last year, a normal payout level for most businesses.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Northwest Bancshares's earnings per share have been growing at 17% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Northwest Bancshares has delivered an average of 6.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Northwest Bancshares worth buying for its dividend? Northwest Bancshares has an acceptable payout ratio and its earnings per share have been improving at a decent rate. We think this is a pretty attractive combination, and would be interested in investigating Northwest Bancshares more closely.
In light of that, while Northwest Bancshares has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Northwest Bancshares has 2 warning signs (and 1 which is significant) we think you should know about.
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.
