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 18th of November. This makes the dividend yield 6.8%, which will augment investor returns quite nicely.

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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 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 92%, 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 89.6%. For the same time horizon, analysts estimate that the future payout ratio could be 59% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Northwest Bancshares

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was $1.56, compared to the most recent full-year payment of $0.80. Doing the maths, this is a decline of about 6.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See Northwest Bancshares' Dividend Growing

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Northwest Bancshares has seen EPS rising for the last five years, at 6.3% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

We should note that Northwest Bancshares has issued stock equal to 15% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

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. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. 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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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.