What To Know Before Buying Northfield Bancorp, Inc. (Staten Island, NY) (NASDAQ:NFBK) For Its Dividend

Could Northfield Bancorp, Inc. (Staten Island, NY) (NASDAQ:NFBK) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

While Northfield Bancorp (Staten Island NY)'s 2.6% dividend yield is not the highest, we think its lengthy payment history is quite interesting. During the year, the company also conducted a buyback equivalent to around 1.2% of its market capitalisation. Some simple analysis can reduce the risk of holding Northfield Bancorp (Staten Island NY) for its dividend, and we'll focus on the most important aspects below.

Click the interactive chart for our full dividend analysis

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Northfield Bancorp (Staten Island NY) paid out 49% of its profit as dividends, over the trailing twelve month period. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. Besides, if reinvestment opportunities dry up, the company has room to increase the dividend.

Consider getting our latest analysis on Northfield Bancorp (Staten Island NY)'s financial position here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Northfield Bancorp (Staten Island NY) has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. Its dividend payments have declined on at least one occasion over the past ten years. During the past ten-year period, the first annual payment was US$0.11 in 2010, compared to US$0.44 last year. Dividends per share have grown at approximately 14% per year over this time. The growth in dividends has not been linear, but the CAGR is a decent approximation of the rate of change over this time frame.

Northfield Bancorp (Staten Island NY) has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, but it might be worth considering if the business has turned a corner.

Dividend Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share (EPS) are growing - it's not worth taking the risk on a dividend getting cut, unless you might be rewarded with larger dividends in future. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it's great to see Northfield Bancorp (Staten Island NY) has grown its earnings per share at 20% per annum over the past five years. Earnings per share have been growing at a good rate, and the company is paying less than half its earnings as dividends. We generally think this is an attractive combination, as it permits further reinvestment in the business.

Conclusion

To summarise, shareholders should always check that Northfield Bancorp (Staten Island NY)'s dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Firstly, we like that Northfield Bancorp (Staten Island NY) has a low and conservative payout ratio. We were also glad to see it growing earnings, but it was concerning to see the dividend has been cut at least once in the past. Overall we think Northfield Bancorp (Staten Island NY) is an interesting dividend stock, although it could be better.

Are management backing themselves to deliver performance? Check their shareholdings in Northfield Bancorp (Staten Island NY) in our latest insider ownership analysis.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.