Northern Trust (NASDAQ:NTRS) Is Due To Pay A Dividend Of $0.75

The board of Northern Trust Corporation (NASDAQ:NTRS) has announced that it will pay a dividend of $0.75 per share on the 1st of January. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

View our latest analysis for Northern Trust

Northern Trust's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Northern Trust has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 37%, which means that Northern Trust would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 5.5%. The future payout ratio could be 45% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Northern Trust Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $1.24, compared to the most recent full-year payment of $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 4.0% a year for the past five years, which isn't massive but still better than seeing them shrink. If Northern Trust is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Northern Trust's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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 of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Northern Trust you should be aware of, and 1 of them is concerning. 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.