Northwest Natural Holding (NYSE:NWN) Will Pay A Dividend Of $0.485
Northwest Natural Holding Company (NYSE:NWN) will pay a dividend of $0.485 on the 15th of February. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.
View our latest analysis for Northwest Natural Holding
Northwest Natural Holding's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Northwest Natural Holding's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.
Looking forward, earnings per share is forecast to rise by 22.5% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.
Northwest Natural Holding Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.78 in 2013, and the most recent fiscal year payment was $1.94. Its dividends have grown at less than 1% per annum over this time frame. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. However, Northwest Natural Holding's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
We should note that Northwest Natural Holding has issued stock equal to 14% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Northwest Natural Holding's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Northwest Natural Holding has 3 warning signs (and 1 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated 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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