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

Northern Trust Corporation (NASDAQ:NTRS) will pay a dividend of $0.75 on the 1st of January. The dividend yield will be 4.2% based on this payment which is still above the industry average.

Check out 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. Past distributions do not necessarily guarantee future ones, but Northern Trust's payout ratio of 57% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 52.6% over the next 3 years. The future payout ratio could be 34% 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 an extended history of paying stable dividends. The dividend has gone from an annual total of $1.20 in 2013 to the most recent total annual payment of $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 could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. In the last five years, Northern Trust's earnings per share has shrunk at approximately 3.7% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

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 payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. 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.