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) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of August to CA$1.02. The payment will take the dividend yield to 4.1%, which is in line with the average for the industry.

See our latest analysis for National Bank of Canada

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

National Bank of Canada has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but National Bank of Canada's payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 2.5%. 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.

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TSX:NA Historic Dividend June 17th 2023

National Bank of Canada Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$1.58 in 2013 to the most recent total annual payment of CA$4.08. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. National Bank of Canada has impressed us by growing EPS at 10% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 10 National Bank of Canada analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.