Yahoo Finance Don't Race Out To Buy Northern Trust Corporation (NASDAQ:NTRS) Just Because It's Going Ex-Dividend
It looks like Northern Trust Corporation (NASDAQ:NTRS) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Northern Trust's shares before the 7th of June to receive the dividend, which will be paid on the 1st of July.
The company's next dividend payment will be US$0.75 per share, and in the last 12 months, the company paid a total of US$3.00 per share. Calculating the last year's worth of payments shows that Northern Trust has a trailing yield of 3.6% on the current share price of US$84.24. 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 Northern Trust has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Northern Trust
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. Northern Trust paid out 66% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Northern Trust's earnings per share have dropped 7.3% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Northern Trust has lifted its dividend by approximately 9.2% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
Final Takeaway
Is Northern Trust worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. Northern Trust doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
So if you're still interested in Northern Trust despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 1 warning sign for Northern Trust and you should be aware of this before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
