Northwest Bancshares (NASDAQ:NWBI) Is Due To Pay A Dividend Of $0.20

The board of Northwest Bancshares, Inc. (NASDAQ:NWBI) has announced that it will pay a dividend of $0.20 per share on the 14th of February. This makes the dividend yield 6.0%, which will augment investor returns quite nicely.

View 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.

Having distributed dividends for at least 10 years, Northwest Bancshares has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 76%, which means that Northwest Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 15.7%. For the same time horizon, analysts estimate that the future payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

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 $0.48 in 2013, and the most recent fiscal year payment was $0.80. This means that it has been growing its distributions at 5.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Northwest Bancshares might have put its house in order since then, but we remain cautious.

Northwest Bancshares May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Northwest Bancshares has only grown its earnings per share at 2.4% per annum over the past five years. 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. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

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 payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Northwest Bancshares that you should be aware of before investing. 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.