Bank of N.T. Butterfield & Son (NYSE:NTB) Has Affirmed Its Dividend Of $0.44

The board of The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) has announced that it will pay a dividend on the 28th of August, with investors receiving $0.44 per share. Based on this payment, the dividend yield on the company's stock will be 5.7%, which is an attractive boost to shareholder returns.

See our latest analysis for Bank of N.T. Butterfield & Son

Bank of N.T. Butterfield & Son's Payment Expected To Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having paid out dividends for 7 years, Bank of N.T. Butterfield & Son has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 36%shows that Bank of N.T. Butterfield & Son would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to rise by 10.9% over the next year. If the dividend continues on this path, the future payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Bank of N.T. Butterfield & Son Is Still Building Its Track Record

It is great to see that Bank of N.T. Butterfield & Son has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 7 years was $0.40 in 2016, and the most recent fiscal year payment was $1.76. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Bank of N.T. Butterfield & Son Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Bank of N.T. Butterfield & Son has impressed us by growing EPS at 9.2% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Bank of N.T. Butterfield & Son's Dividend

Overall, we like to see the dividend staying consistent, and we think Bank of N.T. Butterfield & Son might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income 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. Case in point: We've spotted 2 warning signs for Bank of N.T. Butterfield & Son (of which 1 doesn't sit too well with us!) you should know about. 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.