On the 01 October 2018, Northern Trust Corporation (NASDAQ:NTRS) will be paying shareholders an upcoming dividend amount of US$0.55 per share. However, investors must have bought the company’s stock before 13 September 2018 in order to qualify for the payment. That means you have only 3 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding Northern Trust can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Northern Trust fare?
Northern Trust has a trailing twelve-month payout ratio of 27.9%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect NTRS’s payout to increase to 31.5% of its earnings, which leads to a dividend yield of around 2.1%. Moreover, EPS should increase to $6.91. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of NTRS it has increased its DPS from $1.12 to $2.2 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Northern Trust produces a yield of 2.1%, which is high for Capital Markets stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, Northern Trust ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for NTRS’s future growth? Take a look at our free research report of analyst consensus for NTRS’s outlook.
- Valuation: What is NTRS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NTRS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.