The board of Finward Bancorp (NASDAQ:FNWD) has announced that it will pay a dividend of $0.12 per share on the 12th of May. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

We've discovered 1 warning sign about Finward Bancorp. View them for free.

Finward Bancorp's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Finward Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Finward Bancorp's latest earnings report puts its payout ratio at 17%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to fall by 66.5%. However, as estimated by analysts, the future payout ratio could be 28% over the same time period, which we think the company can easily maintain.

Check out our latest analysis for Finward Bancorp

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.00 in 2015 to the most recent total annual payment of $0.48. The dividend has shrunk at around 7.1% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Finward Bancorp May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's not great to see that Finward Bancorp's earnings per share has fallen at approximately 4.5% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Finward Bancorp's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Finward Bancorp's payments, as there could be some issues with sustaining them into the future. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Finward Bancorp 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.