An Analysis of the Bank's Dividend History, Yield, Growth, and Sustainability
The National Bank of Canada (NTIOF) has recently announced a dividend of $1.02 per share, set to be payable on November 1, 2023, with the ex-dividend date established for September 22, 2023. As investors eagerly anticipate this forthcoming payment, attention is also drawn to the bank's dividend history, yield, and growth rates. This article, using data from GuruFocus, will delve into National Bank of Canada's dividend performance and evaluate its sustainability.
Understanding National Bank of Canada
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The National Bank of Canada is the sixth-largest Canadian bank. It provides integrated financial services, primarily in the province of Quebec and the city of Toronto. The bank's operational segments include personal and commercial banking, wealth management, and a financial markets group.
A Look at National Bank of Canada's Dividend History
Since 2003, the National Bank of Canada has maintained a consistent dividend payment record, with dividends currently distributed on a quarterly basis. The bank has increased its dividend each year since 2003, earning it the title of a dividend achiever, an honor bestowed to companies that have increased their dividend each year for at least the past 20 years.
Breaking Down National Bank of Canada's Dividend Yield and Growth
As of today, the National Bank of Canada has a 12-month trailing dividend yield of 4.18% and a 12-month forward dividend yield of 4.34%. This indicates an expectation of increased dividend payments over the next 12 months.
Over the past three years, the bank's annual dividend growth rate was 10.40%. Extended to a five-year horizon, this rate decreased to 8.30% per year. Over the past decade, National Bank of Canada's annual dividends per share growth rate stands at 7.70%.
Based on the bank's dividend yield and five-year growth rate, the 5-year yield on cost of National Bank of Canada stock as of today is approximately 6.23%.
Assessing Dividend Sustainability: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of July 31, 2023, National Bank of Canada's dividend payout ratio is 0.42.
The bank's profitability rank, as of July 31, 2023, is 5 out of 10, suggesting fair profitability. The bank has reported positive net income each year over the past decade, further solidifying its high profitability.
Examining Growth Metrics: The Future Outlook
National Bank of Canada's growth rank of 5 out of 10 suggests that the bank has a fair growth outlook. The bank's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. National Bank of Canada's revenue has increased by approximately 9.30% per year on average, a rate that outperforms approximately 64.9% of global competitors.
The bank's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, National Bank of Canada's earnings increased by approximately 14.90% per year on average, a rate that outperforms approximately 67.12% of global competitors.
Lastly, the bank's 5-year EBITDA growth rate stands at 12.10%, outperforming approximately 62.42% of global competitors.
In conclusion, the National Bank of Canada's consistent dividend payments, steady growth rate, sustainable payout ratio, fair profitability, and robust growth metrics all indicate a promising future for the bank's dividend performance. As value investors, these are critical factors to consider when evaluating the bank's potential for long-term investment. The bank's commitment to maintaining and growing its dividends, combined with its solid financial performance, makes it a compelling option for dividend-focused investors.
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This article first appeared on GuruFocus.