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Is Norwood Financial Corp. (NASDAQ:NWFL) A Smart Pick For Income Investors?

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Brandon Murphy
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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Norwood Financial Corp. (NASDAQ:NWFL) has been paying a dividend to shareholders. Today it yields 3.1%. Let’s dig deeper into whether Norwood Financial should have a place in your portfolio.

View our latest analysis for Norwood Financial

How I analyze 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?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Does earnings amply cover its dividend payments?

  • Will it have the ability to keep paying its dividends going forward?

NASDAQGM:NWFL Historical Dividend Yield February 8th 19
NASDAQGM:NWFL Historical Dividend Yield February 8th 19

How well does Norwood Financial fit our criteria?

The company currently pays out 41% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of NWFL it has increased its DPS from $0.65 to $0.96 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. These are all positive signs of a great, reliable dividend stock.

Compared to its peers, Norwood Financial produces a yield of 3.1%, which is high for Banks stocks but still below the market’s top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank Norwood Financial as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. I’ve put together three relevant factors you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for NWFL’s future growth? Take a look at our free research report of analyst consensus for NWFL’s outlook.

  2. Valuation: What is NWFL 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 NWFL is currently mispriced by the market.

  3. 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 editorial-team@simplywallst.com.