Northern Star Resources Limited (ASX:NST) will pay a dividend of A$0.25 on the 27th of March. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

Check out our latest analysis for Northern Star Resources

Northern Star Resources' Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by Northern Star Resources' earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 60.1%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Northern Star Resources Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of A$0.035 in 2015 to the most recent total annual payment of A$0.40. This means that it has been growing its distributions at 28% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Northern Star Resources has seen EPS rising for the last five years, at 22% per annum. Northern Star Resources is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Northern Star Resources Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Northern Star Resources is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 17 Northern Star Resources analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated 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.