Northern Technologies International's (NASDAQ:NTIC) Dividend Will Be $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
Solid dividend yields are great, but they only really help us if the payment is sustainable. 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
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. 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. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Has Limited Growth Potential
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. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Northern Technologies International's payments, as there could be some issues with sustaining them into the future. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Northern Technologies International that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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