Northwest Natural Holding (NYSE:NWN) Is Increasing Its Dividend To $0.49

Northwest Natural Holding Company (NYSE:NWN) has announced that it will be increasing its periodic dividend on the 15th of November to $0.49, which will be 0.5% higher than last year's comparable payment amount of $0.488. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Northwest Natural Holding

Northwest Natural Holding's Future Dividend Projections Appear Well Covered By Earnings

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.

Looking forward, earnings per share is forecast to rise by 39.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 66%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Northwest Natural Holding Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $1.84 total annually to $1.95. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Northwest Natural Holding May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Northwest Natural Holding's earnings per share has shrunk at approximately 2.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Northwest Natural Holding will make a great income stock. 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 don't think Northwest Natural Holding is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Northwest Natural Holding has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.