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

The board of First Northwest Bancorp (NASDAQ:FNWB) has announced that it will pay a dividend on the 22nd of November, with investors receiving $0.07 per share. This payment means that the dividend yield will be 2.8%, which is around the industry average.

See our latest analysis for First Northwest Bancorp

First Northwest Bancorp's Distributions May Be Difficult To Sustain

We aren't too impressed by dividend yields unless they can be sustained over time.

First Northwest Bancorp has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and First Northwest Bancorp's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. 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.

Looking forward, earnings per share could 14.8% over the next year if the trend of the last few years can't be broken. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

First Northwest Bancorp Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. 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. 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 Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though First Northwest Bancorp's EPS has declined at around 15% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

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

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for First Northwest Bancorp (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.