First Financial Northwest (NASDAQ:FFNW) Will Pay A Dividend Of US$0.11

The board of First Financial Northwest, Inc. (NASDAQ:FFNW) has announced that it will pay a dividend of US$0.11 per share on the 17th of September. Based on this payment, the dividend yield will be 2.7%, which is fairly typical for the industry.

Check out our latest analysis for First Financial Northwest

First Financial Northwest's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, First Financial Northwest's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 0.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 42%, which we are pretty comfortable with and we think is feasible on an earnings basis.

First Financial Northwest Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2013, the first annual payment was US$0.16, compared to the most recent full-year payment of US$0.44. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. First Financial Northwest has seen EPS rising for the last five years, at 14% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for First Financial Northwest's prospects of growing its dividend payments in the future.

First Financial Northwest Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think First Financial Northwest might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for First Financial Northwest you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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