Readers hoping to buy The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Bank of N.T. Butterfield & Son’s shares before the 5th of August in order to receive the dividend, which the company will pay on the 22nd of August.
The company’s next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.76 per share. Last year’s total dividend payments show that Bank of N.T. Butterfield & Son has a trailing yield of 5.2% on the current share price of $33.89. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Bank of N.T. Butterfield & Son can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. That’s why it’s good to see Bank of N.T. Butterfield & Son paying out a modest 50% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Bank of N.T. Butterfield & Son’s earnings have been skyrocketing, up 24% per annum for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Bank of N.T. Butterfield & Son has lifted its dividend by approximately 28% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Has Bank of N.T. Butterfield & Son got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Bank of N.T. Butterfield & Son more closely.
On that note, you’ll want to research what risks Bank of N.T. Butterfield & Son is facing. In terms of investment risks, we’ve identified 1 warning sign with Bank of N.T. Butterfield & Son and understanding them should be part of your investment process.
If you’re in the market for strong dividend payers, we recommend checking our selection of top 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
