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. Ex-dividend means that investors that purchase the stock on or after the 10th of November will not receive this dividend, which will be paid on the 30th of November.
Bank of N.T. Butterfield & Son's next dividend payment will be US$0.44 per share, on the back of last year when the company paid a total of US$1.76 to shareholders. Based on the last year's worth of payments, Bank of N.T. Butterfield & Son has a trailing yield of 6.6% on the current stock price of $26.86. If you buy this business for its dividend, you should have an idea of whether Bank of N.T. Butterfield & Son's dividend is reliable and sustainable. So we need to investigate whether Bank of N.T. Butterfield & Son can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bank of N.T. Butterfield & Son paid out 61% of its earnings to investors last year, a normal payout level for most businesses.
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.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Bank of N.T. Butterfield & Son's earnings per share have been growing at 12% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past four years, Bank of N.T. Butterfield & Son has increased its dividend at approximately 45% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid Bank of N.T. Butterfield & Son? Earnings per share are growing nicely, and Bank of N.T. Butterfield & Son is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, Bank of N.T. Butterfield & Son looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Bank of N.T. Butterfield & Son has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Bank of N.T. Butterfield & Son that we recommend you consider before investing in the business.
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. 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.
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