First Financial Northwest (NASDAQ:FFNW) Has Announced A Dividend Of $0.13

The board of First Financial Northwest, Inc. (NASDAQ:FFNW) has announced that it will pay a dividend on the 28th of March, with investors receiving $0.13 per share. This payment means the dividend yield will be 2.5%, which is below the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Financial Northwest's stock price has increased by 89% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for First Financial Northwest

First Financial Northwest's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having distributed dividends for at least 10 years, First Financial Northwest has a long history of paying out a part of its earnings to shareholders. Based on First Financial Northwest's last earnings report, the payout ratio is at a decent 75%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 29.8% over the next 3 years. However, analysts forecast that the future payout ratio could reach 88% over the same time period. This is definitely on the higher side of what we consider sustainable.

First Financial Northwest Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.16 total annually to $0.52. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. First Financial Northwest's EPS has fallen by approximately 14% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

First Financial Northwest'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. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

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, First Financial Northwest has 3 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.