Northwest Natural Holding (NYSE:NWN) Is Paying Out A Larger Dividend Than Last Year

Northwest Natural Holding Company's (NYSE:NWN) periodic dividend will be increasing on the 15th of November to $0.485, with investors receiving 0.5% more than last year's $0.483. Based on this payment, the dividend yield for the company will be 4.2%, which is fairly typical for the industry.

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Northwest Natural Holding's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Northwest Natural Holding was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.

Looking forward, earnings per share is forecast to rise by 17.3% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 74% which would be quite comfortable going to take the dividend forward.

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. The dividend has gone from an annual total of $1.78 in 2012 to the most recent total annual payment of $1.93. Dividend payments have been growing, but very slowly over the period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. However, Northwest Natural Holding's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

An additional note is that the company has been raising capital by issuing stock equal to 14% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Northwest Natural Holding's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Northwest Natural Holding will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 4 warning signs for Northwest Natural Holding (of which 1 doesn't sit too well with us!) 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.