Northern Technologies International (NASDAQ:NTIC) Is Paying Out A Dividend Of $0.07

Northern Technologies International Corporation (NASDAQ:NTIC) will pay a dividend of $0.07 on the 17th of May. This means the dividend yield will be fairly typical at 2.4%.

View our latest analysis for Northern Technologies International

Northern Technologies International's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

Looking forward, earnings per share is forecast to rise by 68.9% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 57% which brings it into quite a comfortable range.

Northern Technologies International's Dividend Has Lacked Consistency

Northern Technologies International has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.28. This means that it has been growing its distributions at 7.0% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Northern Technologies International's EPS has fallen by approximately 11% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Northern Technologies International's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Northern Technologies International's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Northern Technologies International that investors should know about before committing capital to this stock. Is Northern Technologies International 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.