Northwest Bancshares (NASDAQ:NWBI) Will 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 15th of August. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Northwest Bancshares

Northwest Bancshares' Dividend Forecasted To Be Well Covered By Earnings

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

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 80%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 7.7%. Likewise, analysts forecast that the future payout ratio could reach 75% over that same time period. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from $0.44 total annually to $0.80. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

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 2.6% 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. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On Northwest Bancshares' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. For example, we've picked out 1 warning sign for Northwest Bancshares that investors should know about before committing capital to this stock. 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.