Northwest Natural Holding's (NYSE:NWN) Upcoming Dividend Will Be Larger Than Last Year's

Northwest Natural Holding Company (NYSE:NWN) has announced that it will be increasing its periodic dividend on the 15th of November to $0.4875, which will be 0.5% higher than last year's comparable payment amount of $0.485. This takes the dividend yield to 4.9%, which shareholders will be pleased with.

View 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. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 6.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

Northwest Natural Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $1.82, compared to the most recent full-year payment of $1.94. 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.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 3.4% per annum over the last five years, which admittedly is a bit slow. Growth of 3.4% 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

In summary, while it's always good to see the dividend being raised, we don't think Northwest Natural Holding's payments are rock solid. While Northwest Natural Holding is earning enough to cover the payments, the cash flows are lacking. We don't think Northwest Natural Holding is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Northwest Natural Holding (1 is significant!) that you should be aware of before investing. Is Northwest Natural Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.