Is It Smart To Buy The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) Before It Goes Ex-Dividend?

It looks like The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 2nd of August in order to be eligible for this dividend, which will be paid on the 16th of August.

Bank of N.T. Butterfield & Son’s upcoming dividend is US$0.44 a share, following on from the last 12 months, when the company distributed a total of US$1.76 per share to shareholders. Based on the last year’s worth of payments, Bank of N.T. Butterfield & Son has a trailing yield of 5.4% on the current stock price of $32.58. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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

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 Bank of N.T. Butterfield & Son’s payout ratio is modest, at just 48% 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.

NYSE:NTB Historical Dividend Yield, July 28th 2019
NYSE:NTB Historical Dividend Yield, July 28th 2019

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 fall far enough, the company could be forced to cut its dividend. It’s encouraging to see Bank of N.T. Butterfield & Son has grown its earnings rapidly, up 27% a year for the past five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Bank of N.T. Butterfield & Son has lifted its dividend by approximately 1.0% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Bank of N.T. Butterfield & Son is keeping back more of its profits to grow the business.

The Bottom Line

Has Bank of N.T. Butterfield & Son got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Bank of N.T. Butterfield & Son more closely.

Wondering what the future holds for Bank of N.T. Butterfield & Son? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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. Thank you for reading.