Northern Trust Company (NASDAQ: NTRS) announced that it will pay a dividend of $0.70 per share on July 1. This means that the annual payout will be 2.5% of the current share price, which is the industry average.
See our latest analysis for Northern Trust
Northern Trust earnings easily cover distributions
We like to see a healthy dividend yield, but that only helps us if the payout can continue. However, prior to this announcement, Northern Trust’s dividend was comfortably covered by both cash flow and earnings. As a result, much of what he earned was plowed back into the business.
Looking ahead, earnings per share are expected to grow 14.8% over the next year. If the dividend continues to follow recent trends, we estimate the payout ratio to be 38%, which is within the range that allows us to be comfortable with the sustainability of the dividend.
Northern Trust has a strong track record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2012, the first annual payment was $1.12, compared to $2.80 for the last annual payment. This implies that the company has increased its distributions at an annual rate of approximately 9.6% over this period. The dividend has increased very well for several years and has provided its shareholders with good income in their portfolios.
The dividend should increase
Investors in the company will be happy to have received dividend income for a while. Northern Trust has seen EPS increase over the past five years, by 10% per year. Northern Trust definitely has the potential to increase its dividend going forward with earnings trending up and a low payout ratio.
We really like the Northern Trust dividend
Overall, we think it’s a great income investment and we think keeping the dividend this year may have been a prudent choice. Distributions are quite easily covered by earnings, which are also converted into cash flow. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. However, there are other things for investors to consider when analyzing stock performance. Earnings growth generally bodes well for the future value of corporate dividend payments. See if the 13 Northern Trust analysts we follow predict continued growth with our free analyst estimates report for the company. Isn’t Northern Trust quite the opportunity you’ve been looking for? Why not check out our selection of the best dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.