First Northwest Bancorp (NASDAQ:FNWB) Will Pay A Dividend Of $0.07

The board of First Northwest Bancorp (NASDAQ:FNWB) has announced that it will pay a dividend of $0.07 per share on the 25th of August. This payment means the dividend yield will be 2.1%, which is below the average for the industry.

See our latest analysis for First Northwest Bancorp

First Northwest Bancorp's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

First Northwest Bancorp has a good history of paying out dividends, with its current track record at 5 years. While past data isn't a guarantee for the future, First Northwest Bancorp's latest earnings report puts its payout ratio at 16%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to fall by 16.0%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 24%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

First Northwest Bancorp Is Still Building Its Track Record

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. The annual payment during the last 5 years was $0.12 in 2018, and the most recent fiscal year payment was $0.28. This implies that the company grew its distributions at a yearly rate of about 18% 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 Northwest Bancorp has impressed us by growing EPS at 31% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like First Northwest Bancorp's Dividend

Overall, we like to see the dividend staying consistent, and we think First Northwest Bancorp might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for First Northwest Bancorp you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.