Northrim BanCorp, Inc. (NASDAQ:NRIM) will increase its dividend on the 17th of September to US$0.38. This takes the dividend yield to 3.5%, which shareholders will be pleased with.
Northrim BanCorp's Earnings Easily Cover the Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Northrim BanCorp was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 27.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 34%, which is comfortable for the company to continue in the future.
Northrim BanCorp Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$0.48, compared to the most recent full-year payment of US$1.52. This means that it has been growing its distributions at 12% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Northrim BanCorp has impressed us by growing EPS at 22% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Northrim BanCorp's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Northrim BanCorp that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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