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

The board of Northern Technologies International Corporation (NASDAQ:NTIC) has announced that it will pay a dividend on the 16th of August, with investors receiving $0.07 per share. 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.

Check out our latest analysis for Northern Technologies International

Northern Technologies International's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Northern Technologies International's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to expand by 75.5%. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

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. The annual payment during the last 6 years was $0.20 in 2017, and the most recent fiscal year payment was $0.28. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Northern Technologies International's EPS has fallen by approximately 10% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Northern Technologies International's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Northern Technologies International is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Northern Technologies International that investors should take into consideration. 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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