Bank of N.T. Butterfield & Son's (NYSE:NTB) Dividend Will Be $0.44

The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) has announced that it will pay a dividend of $0.44 per share on the 28th of November. The dividend yield will be 5.6% based on this payment which is still above the industry average.

Our analysis indicates that NTB is potentially undervalued!

Bank of N.T. Butterfield & Son's Earnings Will Easily Cover The Distributions

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

Bank of N.T. Butterfield & Son has a good history of paying out dividends, with its current track record at 6 years. Past distributions do not necessarily guarantee future ones, but Bank of N.T. Butterfield & Son's payout ratio of 45% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 32.4%. The future payout ratio could be 36% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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 dividend has gone from an annual total of $0.40 in 2016 to the most recent total annual payment of $1.76. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Bank of N.T. Butterfield & Son has impressed us by growing EPS at 15% per year over the past five years. 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.

Bank of N.T. Butterfield & Son Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Bank of N.T. Butterfield & Son that investors should take into consideration. 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.