Finward Bancorp (NASDAQ:FNWD) Is Due To Pay A Dividend Of $0.31

The board of Finward Bancorp (NASDAQ:FNWD) has announced that it will pay a dividend on the 5th of October, with investors receiving $0.31 per share. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.

View our latest analysis for Finward Bancorp

Finward Bancorp's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Finward Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 40%, which means that Finward Bancorp would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to fall by 20.8%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 53%, which would be comfortable for the company to continue in the future.

Finward Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.76 in 2013 to the most recent total annual payment of $1.24. This means that it has been growing its distributions at 5.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Although it's important to note that Finward Bancorp's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Finward Bancorp's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Finward Bancorp (1 is potentially serious!) that you should be aware of before investing. Is Finward Bancorp 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.