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Should You Buy The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) For Its Upcoming Dividend?

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The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) stock is about to trade ex-dividend in four days. You will need to purchase shares before the 4th of August to receive the dividend, which will be paid on the 19th of August.

Bank of N.T. Butterfield & Son's next dividend payment will be US$0.44 per share. Last year, in total, the company distributed US$1.76 to shareholders. Based on the last year's worth of payments, Bank of N.T. Butterfield & Son stock has a trailing yield of around 6.6% on the current share price of $26.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out 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 57% of its earnings to investors last year, a normal payout level for most businesses.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Bank of N.T. Butterfield & Son's earnings per share have risen 13% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last four years, Bank of N.T. Butterfield & Son has lifted its dividend by approximately 45% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Bank of N.T. Butterfield & Son? Bank of N.T. Butterfield & Son has an acceptable payout ratio and its earnings per share have been improving at a decent rate. In summary, Bank of N.T. Butterfield & Son appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Bank of N.T. Butterfield & Son for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Bank of N.T. Butterfield & Son (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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