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

By
Simply Wall St
Published
May 06, 2021
NYSE:NTB
Source: Shutterstock

It looks like The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is about to go ex-dividend in the next three days. Investors can purchase shares before the 11th of May in order to be eligible for this dividend, which will be paid on the 26th of May.

Bank of N.T. Butterfield & Son's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.76 per share. Calculating the last year's worth of payments shows that Bank of N.T. Butterfield & Son has a trailing yield of 4.4% on the current share price of $39.82. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bank of N.T. Butterfield & Son is paying out an acceptable 59% of its profit, a common payout level among most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:NTB Historic Dividend May 7th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Bank of N.T. Butterfield & Son's earnings per share have been growing at 19% 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. In the past five years, Bank of N.T. Butterfield & Son has increased its dividend at approximately 34% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Bank of N.T. Butterfield & Son got what it takes to maintain its dividend payments? Earnings per share are growing nicely, and Bank of N.T. Butterfield & Son is paying out a percentage of its earnings that is around the average for dividend-paying stocks. We think this is a pretty attractive combination, and would be interested in investigating Bank of N.T. Butterfield & Son more closely.

While it's tempting to invest in Bank of N.T. Butterfield & Son for the dividends alone, you should always be mindful of the risks involved. For example - Bank of N.T. Butterfield & Son has 1 warning sign we think you should be aware of.

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.

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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. 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.
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