Northwest Bancshares (NASDAQ:NWBI) Has Announced A Dividend Of $0.20

The board of Northwest Bancshares, Inc. (NASDAQ:NWBI) has announced that it will pay a dividend on the 15th of May, with investors receiving $0.20 per share. This makes the dividend yield 7.4%, which will augment investor returns quite nicely.

See our latest analysis for Northwest Bancshares

Northwest Bancshares' Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Northwest Bancshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Northwest Bancshares' last earnings report, the payout ratio is at a decent 78%, 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 fall by 0.7%. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 83%, which is definitely on the higher side.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from $0.52 total annually to $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Northwest Bancshares' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Northwest Bancshares (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.