Northern Trust (NASDAQ:NTRS) dividend will be $0.70

Northern Trust Company (NASDAQ:NTRS) investors are due to receive a payout of $0.70 per share on April 1. The dividend yield will be 2.5% based on this payout, which is still above the industry average.

Northern Trust earnings easily cover distributions

Impressive dividend yields are good, but that doesn’t matter much if payouts can’t be sustained. Based on the last payment, Northern Trust was only paying out a fraction of revenue, but the payment was a whopping 210% of cash flow. Such a high cash payout ratio could put the dividend under pressure and force the company to reduce it in the future if it were to go through difficult times.

Looking ahead, earnings per share are expected to grow 8.2% over the next year. If the dividend continues to follow recent trends, we estimate the payout ratio to be 41%, which is within the range that allows us to be comfortable with the sustainability of the dividend.

NasdaqGS: Historic NTRS Dividend January 23, 2022

Northern Trust has a strong track record

Even over a long history of paying dividends, the company’s distributions have been remarkably stable. The dividend increased from US$1.12 in 2012 to the last annual payment of US$2.80. This equates to a compound annual growth rate (CAGR) of approximately 9.6% per year during this period. Companies like this can be very valuable in the long run, if the decent growth rate can be maintained.

The dividend should increase

Investors who have held shares of the company for the past few years will be pleased with the dividend income they have received. It is encouraging to see that Northern Trust has increased its earnings per share by 11% per year over the past five years. Northern Trust definitely has the potential to increase its dividend going forward with earnings trending up and a low payout ratio.

In summary

In summary, while it’s good to see the dividend hasn’t been cut, we’re a little cautious about Northern Trust’s payouts as there may be issues maintaining them in the future. With no cash flow, it’s hard to see how the company can sustain a dividend payment. This company is not in the high end of income providing stocks.

Companies with a stable dividend policy are likely to enjoy greater investor interest than those that suffer from a more inconsistent approach. However, there are other things for investors to consider when analyzing stock performance. For example, we chose 1 warning sign for Northern Trust that investors should consider. If you are a dividend investor, you can also consult our curated list of high performing dividend stocks.

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