Northwest Natural Holding (NYSE:NWN) Is Paying Out A Dividend Of $0.4875

The board of Northwest Natural Holding Company (NYSE:NWN) has announced that it will pay a dividend on the 15th of February, with investors receiving $0.4875 per share. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

See our latest analysis for Northwest Natural Holding

Northwest Natural Holding's Dividend Is 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.

The next year is set to see EPS grow by 11.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 66%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 $1.82 total annually to $1.95. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Northwest Natural Holding May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 3.2% per year. Northwest Natural Holding's 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. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Northwest Natural Holding has 3 warning signs (and 1 which is a bit concerning) we think you should know about. 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.