First Northwest Bancorp (NASDAQ:FNWB) will pay a dividend of $0.07 on the 26th of May. This payment means the dividend yield will be 2.3%, which is below the average for the industry.

See our latest analysis for First Northwest Bancorp

First Northwest Bancorp's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for only 4 years, First Northwest Bancorp does not have much of a history being a dividend paying company. Despite the company's shorter dividend history however, calculating for its payout ratio of 12% shows that First Northwest Bancorp is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 5.8% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 21%, which would be comfortable for the company to continue in the future.

First Northwest Bancorp Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 4 years was $0.12 in 2019, and the most recent fiscal year payment was $0.28. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that First Northwest Bancorp has been growing its earnings per share at 35% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

First Northwest Bancorp Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for First Northwest Bancorp (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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