Readers hoping to buy The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 2nd of August in order to receive the dividend, which the company will pay on the 16th of August.
Bank of N.T. Butterfield & Son's upcoming dividend is US$0.44 a share, following on from the last 12 months, when the company distributed a total of US$1.76 per share to shareholders. Based on the last year's worth of payments, Bank of N.T. Butterfield & Son has a trailing yield of 5.4% on the current stock price of $32.58. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Bank of N.T. Butterfield & Son has been able to grow its dividends, or if the dividend might be cut.
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 Bank of N.T. Butterfield & Son paying out a modest 48% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. That's why it's comforting to see Bank of N.T. Butterfield & Son's earnings have been skyrocketing, up 27% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Bank of N.T. Butterfield & Son has lifted its dividend by approximately 1.0% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Bank of N.T. Butterfield & Son is keeping back more of its profits to grow the business.
The Bottom Line
From a dividend perspective, should investors buy or avoid Bank of N.T. Butterfield & Son? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Bank of N.T. Butterfield & Son more closely.
Curious what other investors think of Bank of N.T. Butterfield & Son? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.