Three Days Left To Buy Northern Technologies International Corporation (NASDAQ:NTIC) Before The Ex-Dividend Date

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Northern Technologies International Corporation (NASDAQ:NTIC) is about to go ex-dividend in just three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Northern Technologies International's shares before the 30th of April in order to receive the dividend, which the company will pay on the 15th of May.

The company's next dividend payment will be US$0.07 per share. Last year, in total, the company distributed US$0.28 to shareholders. Calculating the last year's worth of payments shows that Northern Technologies International has a trailing yield of 1.6% on the current share price of US$17.39. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Northern Technologies International has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Northern Technologies International

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Northern Technologies International paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 43% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Northern Technologies International paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Northern Technologies International's earnings per share have dropped 8.0% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Northern Technologies International has delivered 5.8% dividend growth per year on average over the past six years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Has Northern Technologies International got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. All things considered, we are not particularly enthused about Northern Technologies International from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Northern Technologies International, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for Northern Technologies International that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking 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.