Should You Buy NBT Bancorp Inc. (NASDAQ:NBTB) For Its Upcoming Dividend?

By
Simply Wall St
Published
February 23, 2022
NasdaqGS:NBTB
Source: Shutterstock

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see NBT Bancorp Inc. (NASDAQ:NBTB) is about to trade ex-dividend in the next four days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, NBT Bancorp investors that purchase the stock on or after the 28th of February will not receive the dividend, which will be paid on the 15th of March.

The company's next dividend payment will be US$0.28 per share, and in the last 12 months, the company paid a total of US$1.12 per share. Calculating the last year's worth of payments shows that NBT Bancorp has a trailing yield of 2.9% on the current share price of $38.89. If you buy this business for its dividend, you should have an idea of whether NBT Bancorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for NBT Bancorp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately NBT Bancorp's payout ratio is modest, at just 31% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NasdaqGS:NBTB Historic Dividend February 23rd 2022

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see NBT Bancorp's earnings per share have risen 15% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, NBT Bancorp has increased its dividend at approximately 3.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because NBT Bancorp is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid NBT Bancorp? 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. NBT Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

In light of that, while NBT Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for NBT Bancorp (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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