Northern Trust (NASDAQ:NTRS) Will Pay A Dividend Of $0.75

The board of Northern Trust Corporation (NASDAQ:NTRS) has announced that it will pay a dividend on the 1st of October, with investors receiving $0.75 per share. The dividend yield will be 4.0% based on this payment which is still above the industry average.

See our latest analysis for Northern Trust

Northern Trust's Dividend Forecasted To Be Well Covered By Earnings

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

Northern Trust has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 54%, which means that Northern Trust would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 41.3% over the next 3 years. Analysts estimate the future payout ratio will be 41% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Northern Trust Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $1.20 total annually to $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Northern Trust May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, Northern Trust's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Northern Trust's Dividend

Overall, a consistent dividend is a good thing, and we think that Northern Trust has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 11 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Northern Trust not quite the opportunity you were looking for? Why not check out our selection of top 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.