Northwest Natural Holding's (NYSE:NWN) Dividend Will Be US$0.48
The board of Northwest Natural Holding Company (NYSE:NWN) has announced that it will pay a dividend on the 13th of May, with investors receiving US$0.48 per share. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.
View our latest analysis for Northwest Natural Holding
Northwest Natural Holding's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.
Looking forward, earnings per share is forecast to fall by 1.2% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 83%, meaning that most of the company's earnings are being paid out to shareholders.
Northwest Natural Holding Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was US$1.74, compared to the most recent full-year payment of US$1.93. This means that it has been growing its distributions at 1.0% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Northwest Natural Holding May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Northwest Natural Holding hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.
Northwest Natural Holding's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Northwest Natural Holding has 3 warning signs (and 1 which is potentially serious) 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.
