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Bank of N.T. Butterfield & Son (NYSE:NTB) Could Be A Buy For Its Upcoming Dividend

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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Bank of N.T. Butterfield & Son's shares before the 5th of August to receive the dividend, which will be paid on the 22nd of August.

The company's next dividend payment will be US$0.44 per share, on the back of last year when the company paid a total of US$1.76 to shareholders. Calculating the last year's worth of payments shows that Bank of N.T. Butterfield & Son has a trailing yield of 5.2% on the current share price of $33.89. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Bank of N.T. Butterfield & Son

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. Bank of N.T. Butterfield & Son paid out a comfortable 50% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Bank of N.T. Butterfield & Son has grown its earnings rapidly, up 24% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Bank of N.T. Butterfield & Son has lifted its dividend by approximately 28% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Bank of N.T. Butterfield & Son for the upcoming dividend? Companies like Bank of N.T. Butterfield & Son that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Bank of N.T. Butterfield & Son ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Bank of N.T. Butterfield & Son looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Bank of N.T. Butterfield & Son you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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