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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.