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 14th of February, with investors receiving $0.20 per share. Based on this payment, the dividend yield on the company's stock will be 6.0%, which is an attractive boost to shareholder returns.

See our latest analysis for Northwest Bancshares

Northwest Bancshares' Earnings Will Easily Cover The Distributions

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. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is an alarming sign for the sustainability of its dividends, as it may mean that Northwest Bancsharesis pulling cash from elsewhere to keep its shareholders happy.

Looking forward, EPS is forecast to rise by 111.5% over the next 3 years. Analyst estimates also show the future payout ratio being 59% in the same 3 years which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $1.62 in 2015, and the most recent fiscal year payment was $0.80. The dividend has shrunk at around 6.8% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Northwest Bancshares' EPS has declined at around 5.7% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

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 don't think Northwest Bancshares is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.