Finward Bancorp (NASDAQ:FNWD) Has Affirmed Its Dividend Of $0.31

Finward Bancorp (NASDAQ:FNWD) has announced that it will pay a dividend of $0.31 per share on the 5th of October. Based on this payment, the dividend yield on the company's stock will be 5.8%, which is an attractive boost to shareholder returns.

See our latest analysis for Finward Bancorp

Finward Bancorp's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Finward Bancorp has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Finward Bancorp's payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to fall by 20.8%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 53%, which would be comfortable for the company to continue in the future.

Finward Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.76 in 2013 to the most recent total annual payment of $1.24. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

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. Finward Bancorp hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, we think Finward Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Finward Bancorp (of which 1 is a bit unpleasant!) you should know about. Is Finward 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.