Finward Bancorp's (NASDAQ:FNWD) investors are due to receive a payment of $0.12 per share on 3rd of February. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Finward Bancorp

Finward Bancorp's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having distributed dividends for at least 10 years, Finward Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Finward Bancorp's payout ratio sits at 18%, an extremely comfortable number that shows that it can pay its dividend.

EPS is set to fall by 60.9% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 31% over the same time period, which is in a pretty comfortable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from $0.88 total annually to $0.48. The dividend has shrunk at around 5.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. In the last five years, Finward Bancorp's earnings per share has shrunk at approximately 6.6% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Finward Bancorp's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Finward Bancorp (of which 1 is potentially serious!) you should know about. 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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