First Northwest Bancorp (NASDAQ:FNWB) Has Announced A Dividend Of $0.07

First Northwest Bancorp (NASDAQ:FNWB) will pay a dividend of $0.07 on the 23rd of August. This payment means that the dividend yield will be 2.8%, which is around the industry average.

View our latest analysis for First Northwest Bancorp

First Northwest Bancorp Not Expected To Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

First Northwest Bancorp has a good history of paying out dividends, with its current track record at 6 years. But while this history shows that First Northwest Bancorp was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company's net income wasn't enough to cover dividends. This value is at an alarming sign that could mean that First Northwest Bancorp's dividend at its current rate may no longer be sustainable for longer.

Over the next year, EPS is forecast to expand by 112.6%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

First Northwest Bancorp Doesn't Have A Long Payment History

It is great to see that First Northwest Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the dividend has gone from $0.12 total annually to $0.28. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. In the last five years, First Northwest Bancorp's earnings per share has shrunk at approximately 2.2% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

We're Not Big Fans Of First Northwest Bancorp's Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

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. For instance, we've picked out 2 warning signs for First Northwest Bancorp that investors should take into consideration. Is First Northwest Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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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