Northwest Bancshares (NASDAQ:NWBI) Has Affirmed Its Dividend Of $0.20

Northwest Bancshares, Inc.'s (NASDAQ:NWBI) investors are due to receive a payment of $0.20 per share on 20th of May. The dividend yield will be 6.5% based on this payment which is still above the industry average.

Our free stock report includes 1 warning sign investors should be aware of before investing in Northwest Bancshares. Read for free now.

Northwest Bancshares' Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Northwest Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Northwest Bancshares' last earnings report, the payout ratio is at a decent 89%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to expand by 23.4%. If the dividend continues along recent trends, we estimate the future payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

View our latest analysis for Northwest Bancshares

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was $1.62, compared to the most recent full-year payment of $0.80. The dividend has shrunk at around 6.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Unfortunately, Northwest Bancshares' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Northwest Bancshares' earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Northwest Bancshares' payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Northwest Bancshares that investors need to be conscious of moving forward. Is Northwest Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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