North West (TSE:NWC) Has Affirmed Its Dividend Of CA$0.41

The board of The North West Company Inc. (TSE:NWC) has announced that it will pay a dividend on the 15th of January, with investors receiving CA$0.41 per share. This means the annual payment is 3.4% of the current stock price, which is above the average for the industry.

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North West's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by North West's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 3.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for North West

North West Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$1.16 in 2015, and the most recent fiscal year payment was CA$1.64. This means that it has been growing its distributions at 3.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. North West is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

North West Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for North West that investors need to be conscious of moving forward. Is North West not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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