Northern Trust's (NASDAQ:NTRS) Dividend Will Be $0.75

Northern Trust Corporation (NASDAQ:NTRS) will pay a dividend of $0.75 on the 1st of July. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Northern Trust

Northern Trust's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Northern Trust has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Northern Trust's last earnings report, the payout ratio is at a decent 66%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 78.7%. The future payout ratio could be 45% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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Northern Trust Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $1.24 total annually to $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Northern Trust's EPS has declined at around 7.0% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Northern Trust's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 11 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Northern Trust not quite the opportunity you were looking for? Why not check out our selection of top 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.