24-year-old Featherstone came through the ranks at Hull City and signed pro terms in 2006, going on to make just eight first team appearances for The Tigers, but he did gain experience during loan spells with North Ferriby United, Grimsby Town and Hereford United, who went on to sign him on a permanent basis following a seven game loan stint.
Nicky was released by the Edgar Street outfit following their relegation to the Blue Square Bet Premier League last season.
Featherstone had initially signed a one-year deal in August 2012 following a successful trial spell.
This is further good news for Saddlers supporters following the recent signings of Andy Taylor, Malvind Benning, Paul Downing and James Baxendale to new deals.