Stock Analysis

National Bank of Canada (TSE:NA) Is Increasing Its Dividend To CA$1.02

TSX:NA
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National Bank of Canada (TSE:NA) will increase its dividend from last year's comparable payment on the 1st of August to CA$1.02. Even though the dividend went up, the yield is still quite low at only 3.9%.

See our latest analysis for National Bank of Canada

National Bank of Canada's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

National Bank of Canada has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on National Bank of Canada's last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 2.6% over the next 3 years. Analysts estimate the future payout ratio will be 45% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
TSX:NA Historic Dividend June 3rd 2023

National Bank of Canada 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 CA$1.58 in 2013 to the most recent total annual payment of CA$3.88. This means that it has been growing its distributions at 9.4% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that National Bank of Canada has been growing its earnings per share at 10% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

National Bank of Canada Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for National Bank of Canada for free with public analyst estimates for the company. Is National Bank of Canada not quite the opportunity you were looking for? Why not check out 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.