Northrim BanCorp, Inc. (NASDAQ:NRIM) Looks Interesting, And It's About To Pay A Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Northrim BanCorp, Inc. (NASDAQ:NRIM) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Northrim BanCorp's shares before the 13th of December in order to be eligible for the dividend, which will be paid on the 22nd of December.
The company's next dividend payment will be US$0.60 per share, on the back of last year when the company paid a total of US$2.40 to shareholders. Calculating the last year's worth of payments shows that Northrim BanCorp has a trailing yield of 4.4% on the current share price of $54.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Northrim BanCorp
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Northrim BanCorp paying out a modest 49% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Northrim BanCorp paid out over the last 12 months.
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. It's encouraging to see Northrim BanCorp has grown its earnings rapidly, up 21% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Northrim BanCorp has delivered 15% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Should investors buy Northrim BanCorp for the upcoming dividend? Companies like Northrim BanCorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Northrim BanCorp 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.
While it's tempting to invest in Northrim BanCorp for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Northrim BanCorp and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
