Why It Might Not Make Sense To Buy First Northwest Bancorp (NASDAQ:FNWB) For Its Upcoming Dividend

Readers hoping to buy First Northwest Bancorp (NASDAQ:FNWB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase First Northwest Bancorp's shares before the 9th of August to receive the dividend, which will be paid on the 23rd of August.

The company's next dividend payment will be US$0.07 per share, on the back of last year when the company paid a total of US$0.28 to shareholders. Looking at the last 12 months of distributions, First Northwest Bancorp has a trailing yield of approximately 2.8% on its current stock price of US$10.11. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for First Northwest Bancorp

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. First Northwest Bancorp paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see how much of its profit First Northwest Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. First Northwest Bancorp was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. First Northwest Bancorp has delivered 15% dividend growth per year on average over the past six years.

We update our analysis on First Northwest Bancorp every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is First Northwest Bancorp an attractive dividend stock, or better left on the shelf? It's hard to get past the idea of First Northwest Bancorp paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in First Northwest Bancorp despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. In terms of investment risks, we've identified 2 warning signs with First Northwest Bancorp and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking 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.

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