Northern Trust's (NASDAQ:NTRS) Dividend Will Be US$0.70

Northern Trust Corporation's (NASDAQ:NTRS) investors are due to receive a payment of US$0.70 per share on 1st of January. The dividend yield will be 2.2% 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 earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 22.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Northern Trust Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from US$1.12 to US$2.80. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% 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.

We Could See Northern Trust's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Northern Trust has grown earnings per share at 7.5% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

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. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 14 analysts we track are forecasting for Northern Trust for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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