Northwest Natural Holding (NYSE:NWN) Will Pay A Dividend Of US$0.48

By
Simply Wall St
Published
October 17, 2021
NYSE:NWN
Source: Shutterstock

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 15th of November. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Northwest Natural Holding

Northwest Natural Holding's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Northwest Natural Holding was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 8.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 73%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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NYSE:NWN Historic Dividend October 18th 2021

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 US$1.74 in 2011 to the most recent annual payment of 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.

Northwest Natural Holding May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.5% per annum over the last five years, which admittedly is a bit slow. Growth of 4.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Northwest Natural Holding (1 can't be ignored!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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