Norwood Financial (NASDAQ:NWFL) Is Increasing Its Dividend To $0.32
Norwood Financial Corp. (NASDAQ:NWFL) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of February to $0.32. This takes the dividend yield to 4.5%, which shareholders will be pleased with.
Norwood Financial's Payment Expected To Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Norwood Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and Norwood Financial's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is an alarming sign that could mean that Norwood Financial's dividend at its current rate may no longer be sustainable for longer.
Looking forward, EPS is forecast to rise by 151.1% over the next 3 years. For the same time horizon, analysts estimate that the future payout ratio could be 36% which would be quite comfortable going to take the dividend forward.
See our latest analysis for Norwood Financial
Norwood Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2016, the dividend has gone from $0.827 total annually to $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Norwood Financial's earnings per share has shrunk at 16% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Our Thoughts On Norwood Financial's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Norwood Financial's payments are rock solid. 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 don't think Norwood Financial is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Norwood Financial that investors should know about before committing capital to this stock. Is Norwood Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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