A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Bankwell Financial Group Inc ( NASDAQ:BWFG ) has paid a dividend to shareholders in the last few years. It currently yields 1.6%. Should it have a place in your portfolio? Let’s take a look at Bankwell Financial Group in more detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Bankwell Financial Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 21%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 23%, leading to a dividend yield of 1.7%. Furthermore, EPS should increase to $2.3. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company . Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Bankwell Financial Group as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Bankwell Financial Group has a yield of 1.6%, which is on the low-side for Banks stocks.
Whilst there are few things you may like about Bankwell Financial Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three important aspects you should further research:
- Future Outlook : What are well-informed industry analysts predicting for BWFG’s future growth? Take a look at our free research report of analyst consensus for BWFG’s outlook.
- Valuation : What is BWFG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BWFG is currently mispriced by the market.
- Dividend Rockstars : Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here .
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org .