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There's A Lot To Like About Northern Star Resources' (ASX:NST) Upcoming AU$0.095 Dividend

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It looks like Northern Star Resources Limited (ASX:NST) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Northern Star Resources' shares on or after the 6th of September will not receive the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be AU$0.095 per share. Last year, in total, the company distributed AU$0.19 to shareholders. Looking at the last 12 months of distributions, Northern Star Resources has a trailing yield of approximately 1.9% on its current stock price of A$9.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Northern Star Resources

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Northern Star Resources paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Northern Star Resources generated enough free cash flow to afford its dividend. It paid out more than half (62%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Northern Star Resources's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Northern Star Resources's earnings have been skyrocketing, up 33% 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, nine years ago, Northern Star Resources has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Northern Star Resources an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Northern Star Resources paid out less than half its earnings and a bit over half its free cash flow. Northern Star Resources looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Northern Star Resources looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Northern Star Resources is showing 3 warning signs in our investment analysis, and 2 of those are potentially serious...

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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