Stock Analysis

National Bank of Canada's (TSE:NA) Upcoming Dividend Will Be Larger Than Last Year's

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$1.10. Based on this payment, the dividend yield for the company will be 4.0%, which is fairly typical for the industry.

View our latest analysis for National Bank of Canada

National Bank of Canada's Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

National Bank of Canada has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 43%, which means that National Bank of Canada would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 4.2% over the next 3 years. Analysts forecast the future payout ratio could be 45% over the same time horizon, which is a number we think the company can maintain.

historic-dividend
TSX:NA Historic Dividend June 13th 2024

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. Since 2014, the annual payment back then was CA$1.74, compared to the most recent full-year payment of CA$4.40. This means that it has been growing its distributions at 9.7% per annum over that time. 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.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. National Bank of Canada has seen EPS rising for the last five years, at 9.8% per annum. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for National Bank of Canada for free with public analyst estimates for the company. 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.