board of directors First Financial Northwest Co., Ltd. (NASDAQ:FFNW) announced that it will pay a dividend on March 28th, with investors receiving $0.13 per share. This payment results in a dividend yield of 2.5%, which is below the industry average.
Dividend yields are important for income investors, but it's also important to take into account large stock price fluctuations, as dividend yields generally exceed the return on dividends. Investors will be pleased to see that First Financial Northwest's stock price is up 82% over the past three months. This is good for shareholders, and also explains the drop in dividend yield.
Check out our latest analysis for First Financial Northwest.
Financial Northwest's first payment promises reliable income
Even if the dividend yield is low, it can become attractive if it continues for many years.
First Financial Northwest has been paying dividends for at least 10 years and has a long history of paying out a portion of its earnings to shareholders. Although past distributions are not necessarily a guarantee of future dividends, First Financial Northwest's payout ratio of 75% is a good sign, as it means that earnings adequately cover the dividend.
Looking ahead, earnings per share are expected to decline by 29.8% over the next three years. Fortunately, the future dividend payout ratio is in line with analysts' estimates and within three years he could reach 88%, which is high but still certainly achievable.
First Financial Northwest has a proven track record
The company has a consistent track record of paying dividends with little volatility. In 2014, he paid $0.16 per year for the past 10 years, and paid $0.52 for the most recent fiscal year. This means that the company grew its distribution at approximately 13% per year over that period. We can see that the payments are showing very good upward momentum with no stagnation, which gives us some peace of mind that future payments can be relied upon as well.
Limited growth potential through dividends
Some investors may be chomping at the bit to buy the company's stock based on its dividend history. Things may not be as good as they seem on the surface, so don't jump to conclusions. First Financial Northwest's earnings per share have declined by 14% annually over the past five years. There is no doubt that such a rapid decline could constrain dividend payments if this trend continues in the future.
Dividends may prove unreliable
Overall, I don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While payments have been stable so far, we believe the company is paying too much to continue this over the long term. If you value income, First Financial Northwest doesn't seem like a good stock to add to your portfolio.
It's important to note that companies with a consistent dividend policy generate greater investor confidence than companies with an erratic dividend policy. At the same time, there are other factors that readers should be aware of before pouring capital into stocks. To that end, First Financial Northwest 3 warning signs (and one you shouldn't ignore) that I think you should know about.Looking for more high-yield dividend ideas? Try ours A group of people with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
