Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First Financial Northwest, Inc. (NASDAQ:FFNW) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 5th of December to receive the dividend, which will be paid on the 20th of December.
First Financial Northwest's next dividend payment will be US$0.09 per share, on the back of last year when the company paid a total of US$0.36 to shareholders. Looking at the last 12 months of distributions, First Financial Northwest has a trailing yield of approximately 2.5% on its current stock price of $14.66. If you buy this business for its dividend, you should have an idea of whether First Financial Northwest's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see First Financial Northwest paying out a modest 35% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see First Financial Northwest's earnings per share have dropped 7.7% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last ten years, First Financial Northwest has lifted its dividend by approximately 0.6% a year on average.
From a dividend perspective, should investors buy or avoid First Financial Northwest? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We're unconvinced on the company's merits, and think there might be better opportunities out there.
Ever wonder what the future holds for First Financial Northwest? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
If you're looking to trade First Financial Northwest, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.