Northern Trust (NASDAQ:NTRS) Is Due To Pay A Dividend Of US$0.70

Northern Trust Corporation (NASDAQ:NTRS) has announced that it will pay a dividend of US$0.70 per share on the 1st of April. The dividend yield will be 2.5% based on this payment which is still above the industry average.

See our latest analysis for Northern Trust

Northern Trust's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Northern Trust's dividend was only 39% of earnings, however it was paying out 210% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 8.2%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Northern Trust Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$1.12 to US$2.80. This means that it has been growing its distributions at 9.6% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Northern Trust has impressed us by growing EPS at 11% per year over the past five years. Northern Trust definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Northern Trust's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Northern Trust's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Northern Trust that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.