The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) will pay a dividend of $0.44 on the 19th of November. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Bank of N.T. Butterfield & Son

Bank of N.T. Butterfield & Son'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.

Bank of N.T. Butterfield & Son has a good history of paying out dividends, with its current track record at 8 years. Based on Bank of N.T. Butterfield & Son's last earnings report, the payout ratio is at a decent 39%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 1.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 40% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Bank of N.T. Butterfield & Son Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the annual payment back then was $0.40, compared to the most recent full-year payment of $1.76. This means that it has been growing its distributions at 20% per annum over that time. Bank of N.T. Butterfield & Son has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bank of N.T. Butterfield & Son has impressed us by growing EPS at 6.8% per year over the past five years. Bank of N.T. Butterfield & Son definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Bank of N.T. Butterfield & Son's Dividend

Overall, a consistent dividend is a good thing, and we think that Bank of N.T. Butterfield & Son has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Bank of N.T. Butterfield & Son (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.