Northwestern Natural Holding Company (NYSE: NWN) investors are expected to receive a payment of $ 0.48 per share on August 13. This means that the dividend yield will be fairly typical at 3.7%.
Check out our latest analysis for Northwest Natural Holding
Northwest Natural Holding Profits Easily Cover Distributions
We like to see a good dividend yield, but that only helps us if the payout can continue. Prior to this announcement, Northwest Natural Holding’s dividend was a huge chunk of earnings, and the company was not generating any cash flow to offset that either. In general, we think this would be a risky practice in the long run.
Going forward, earnings per share are expected to fall 4.3% over the next year. Assuming the dividend continues according to recent trends, we think the payout ratio could be 73%, which we are quite comfortable with and believe to be achievable on an earnings basis.
Northwest Natural Holding has a strong track record
The company has a sustained history of paying dividends with very little fluctuation. Since 2011, the first annual payment was US $ 1.74, compared to the most recent annual payment of US $ 1.92. Dividend payouts have increased, but very slowly over the period. While we can’t deny that the dividend has been remarkably stable in the past, growth has been quite subdued.
Dividend Growth Can Be Hard To Achieve
Investors in the company will be happy to receive dividends for some time. Revenue has grown 3.4% per year for the past five years, which admittedly is a bit slow. Slow growth and a high payout ratio could mean that Northwest Natural Holding maximized the amount it was able to pay shareholders. This is great, but we are less enthusiastic as this often indicates that the dividend is likely to grow more slowly in the future.
Our thoughts on the Northwest Natural Holding dividend
In summary, while it is good to see that the dividend has not been reduced, we are a little cautious about the payments from Northwest Natural Holding as there could be issues maintaining them going forward. With no cash flow, it’s hard to see how the business can support the payment of a dividend. We don’t think Northwest Natural Holding is a great stock to add to your portfolio if income is your goal.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. For example, we have chosen 1 warning sign for Northwest Natural Holding that investors should be aware of before committing capital to this stock. We have also set up a list of global stocks with a solid dividend.
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