Northwest Natural Holding (NYSE:NWN) Will Pay A 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 15th of February. The dividend yield will be 3.9% based on this payment which is still above the industry average.

Check out our latest analysis for Northwest Natural Holding

Northwest Natural Holding's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Northwest Natural Holding's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.

Looking forward, earnings per share is forecast to fall by 5.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 73%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Northwest Natural Holding Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$1.74, compared to the most recent full-year payment of US$1.93. This means that it has been growing its distributions at 1.0% per annum over that time. 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

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 4.5% per year. Slow growth and a high payout ratio could mean that Northwest Natural Holding has maxed out the amount that it has been able to pay to shareholders. 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.

Our Thoughts On Northwest Natural Holding's Dividend

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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Northwest Natural Holding that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list 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.