The advice of Northern Trust Company (NASDAQ: NTRS) said it would increase its dividend by 7.1% on Oct. 1 to $0.75, up from the comparable payout of $0.70 last year. This brings the annual payout to 2.9% of the current share price, which is within the industry average.
Northern Trust’s profits will easily cover distributions
We like to see a healthy dividend yield, but that only helps us if the payout can continue.
Northern Trust has established itself as a dividend-paying company with over 10 years of experience distributing profits to shareholders. Past distributions don’t necessarily guarantee future distributions, but Northern Trust’s 39% payout ratio is a good sign as it means earnings decently cover dividends.
Over the next 3 years, EPS is expected to increase by 30.4%. Analysts predict the future payout ratio could be 35% over the same time horizon, a figure we believe the company can sustain.
Northern Trust has a strong track record
The company has a steady history of paying dividends with very little fluctuation. The annual payment over the past 10 years was $1.12 in 2012, and the most recent year’s payment was $2.80. This equates to a compound annual growth rate (CAGR) of approximately 9.6% per year during this period. Dividend growth has been quite reliable, so we believe this can provide investors with some good additional income in their portfolio.
The dividend should increase
Investors in the company will be happy to have received dividend income for a while. We are encouraged to see that Northern Trust has increased its earnings per share by 10% per year over the past five years. A low payout ratio and decent growth suggest the company is reinvesting well, and also has plenty of room to grow the dividend over time.
We really like the Northern Trust dividend
Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it’s good to see that income translate into cash flow. Considering all of this, it looks like a good dividend opportunity.
Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. Yet investors must consider a host of other factors, aside from dividend payments, when analyzing a company. Companies with rising earnings tend to be the best dividend-paying stocks over the long term. Discover the forecasts of the 15 analysts we follow for Northern Trust free with public analyst estimates for the company. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.
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