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The board of Northern Trust Corporation (NASDAQ:NTRS) has announced that it will pay a dividend on the 1st of April, with investors receiving $0.75 per share. This means the dividend yield will be fairly typical at 2.7%.
See our latest analysis for Northern Trust
Northern Trust's Earnings Will Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
Northern Trust has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Northern Trust's last earnings report, the payout ratio is at a decent 31%, meaning that the company is able to pay out its dividend with a bit of room to spare.
EPS is set to fall by 2.1% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 35% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
Northern Trust Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.32 in 2015 to the most recent total annual payment of $3.00. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
We Could See Northern Trust's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Northern Trust has been growing its earnings per share at 8.6% a year over the past five years. Northern Trust definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Northern Trust Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Northern Trust has 2 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.