The board of Bankwell Financial Group, Inc. (NASDAQ:BWFG) has announced that it will pay a dividend on the 22nd of November, with investors receiving $0.20 per share. This means that the annual payment will be 2.8% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Bankwell Financial Group

Bankwell Financial Group's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for 9 years, Bankwell Financial Group has a good 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 of 43%shows that Bankwell Financial Group would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast by analysts to rise exponentially over the next 3 years. They also estimate that the future payout ratio will be 19% in the same time horizon, so there isn't too much pressure on the dividend.

Bankwell Financial Group Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was $0.20 in 2015, and the most recent fiscal year payment was $0.80. This means that it has been growing its distributions at 17% per annum over that time. Bankwell Financial Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Bankwell Financial Group May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. In the last five years, Bankwell Financial Group's earnings per share has shrunk at approximately 3.9% 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. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Bankwell Financial Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bankwell Financial Group's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Bankwell Financial Group has been making. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Bankwell Financial Group that investors should take into consideration. Is Bankwell Financial Group 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.