Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Northern Trust Company (NASDAQ: NTRS) is set to trade off dividend within the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is an important date to know, as any purchase of shares made after this date may mean a late settlement which does not appear on the registration date. Thus, you can buy Northern Trust shares before December 9 in order to receive the dividend that the company will pay on January 1.
The company’s next dividend payment will be US $ 0.70 per share. Last year, in total, the company distributed US $ 2.80 to shareholders. Looking at the last 12 months of distributions, Northern Trust has a rolling return of approximately 2.4% on its current price of $ 116.66. We love to see companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our goose that lays the golden eggs! It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. This is why it is good to see Northern Trust donate a modest 44% of its profits.
Companies that pay less dividends than they earn profits generally have more sustainable dividends. The lower the payout ratio, the more leeway the company has before being forced to reduce the dividend.
Historic NasdaqGS dividend: NTRS December 4, 2021
Have profits and dividends increased?
Companies with constantly increasing earnings per share usually make the best dividend-paying stocks because they generally find it easier to increase dividends per share. Investors love dividends, so if profits fall and the dividend is reduced, expect a stock to be sold massively at the same time. That’s why it’s a relief to see Northern Trust’s earnings per share increase by 9.7% per year over the past five years.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past 10 years, Northern Trust has increased its dividend to around 9.6% per annum on average. It’s encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
Does Northern Trust have what it takes to maintain its dividend payments? Northern Trust has seen its earnings per share slowly increase in recent years and the company is reinvesting more than half of its earnings back into the business, which generally bodes well for its future prospects. Northern Trust ticks a lot of boxes for us from a dividend perspective, and we believe these characteristics should mark the company as deserving more attention.
Although it is tempting to invest in Northern Trust purely for dividends, you should always be aware of the risks involved. For example, we found 1 warning sign for Northern Trust which we recommend that you consider before investing in the business.
A common investment mistake is to buy the first interesting stock you see. Here you can find a list of promising dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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