Norwood Financial Corp. (NASDAQ:NWFL) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 14th of January will not receive this dividend, which will be paid on the 1st of February.
Norwood Financial's upcoming dividend is US$0.26 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Last year's total dividend payments show that Norwood Financial has a trailing yield of 3.8% on the current share price of $27.18. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Norwood Financial is paying out an acceptable 51% of its profit, a common payout level among most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Norwood Financial earnings per share are up 6.9% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Norwood Financial has increased its dividend at approximately 4.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
From a dividend perspective, should investors buy or avoid Norwood Financial? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We think there are likely better opportunities out there.
If you're not too concerned about Norwood Financial's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Norwood Financial has 1 warning sign we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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