Northern Technologies International (NASDAQ:NTIC) Will Pay A Dividend Of $0.07

Northern Technologies International Corporation (NASDAQ:NTIC) will pay a dividend of $0.07 on the 15th of February. This means that the annual payment will be 2.2% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Northern Technologies International

Northern Technologies International's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the dividend made up 111% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Over the next year, EPS is forecast to expand by 69.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Northern Technologies International's Dividend Has Lacked Consistency

Looking back, Northern Technologies International's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from $0.20 total annually to $0.28. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Northern Technologies International might have put its house in order since then, but we remain cautious.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 12% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of Northern Technologies International's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Northern Technologies International make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Northern Technologies International (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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