Bankwell Financial Group, Inc.'s (NASDAQ:BWFG) investors are due to receive a payment of $0.20 per share on 21st of February. Based on this payment, the dividend yield will be 2.7%, which is fairly typical for the industry.

View our latest analysis for Bankwell Financial Group

Bankwell Financial Group's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Bankwell Financial Group has a good history of paying out dividends, with its current track record at 9 years. Taking data from its last earnings report, calculating for the company's payout ratio of 68%shows that Bankwell Financial Group would be able to pay its last dividend without pressure on the balance sheet.

Analysts expect a massive rise in earnings per share in the next 3 years. Additionally, they estimate future payout ratio will be 18% over the same time horizon, which makes us pretty comfortable with the sustainability of the dividend.

Bankwell Financial Group Doesn't Have A Long Payment History

Bankwell Financial Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the dividend has gone from $0.20 total annually to $0.80. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. 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.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Earnings per share has been sinking by 13% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

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 low payout ratio is a redeeming feature, but generally we are not too happy with the payments Bankwell Financial Group has been making. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Bankwell Financial Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.