Norwood Financial Corp. (NASDAQ:NWFL) has announced that it will be increasing its periodic dividend on the 1st of February to $0.30, which will be 3.4% higher than last year's comparable payment amount of $0.29. This makes the dividend yield about the same as the industry average at 3.4%.

Check out our latest analysis for Norwood Financial

Norwood Financial's Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Norwood Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Norwood Financial's payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

If the trend of the last few years continues, EPS will grow by 11.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 37% by next year, which is in a pretty sustainable range.

Norwood Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.752, compared to the most recent full-year payment of $1.16. This means that it has been growing its distributions at 4.4% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Norwood Financial has grown earnings per share at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Norwood Financial's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Norwood Financial stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.