Northwest Natural Holding (NYSE:NWN) Has Re-Affirmed Its Dividend Of US$0.48

The board of Northwest Natural Holding Company (NYSE:NWN) has announced that it will pay a dividend of US$0.48 per share on the 13th of May. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Northwest Natural Holding

Northwest Natural Holding's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to fall by 1.2%. If recent patterns in the dividend continue, we could see the payout ratio reaching 83% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Northwest Natural Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$1.74 to US$1.93. This works out to be a compound annual growth rate (CAGR) of approximately 1.0% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Northwest Natural Holding hasn't seen much change in its earnings per share over the last five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. 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.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Northwest Natural Holding you should be aware of, and 1 of them shouldn't be ignored. Is Northwest Natural Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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