Northern Trust Corporation (NASDAQ:NTRS) will pay a dividend of $0.75 on the 1st of April. Based on this payment, the dividend yield will be 2.7%, which is fairly typical for the industry.

Check out our latest analysis for Northern Trust

Northern Trust's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

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 31%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 2.1% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 35% over the same time period, which is in a pretty comfortable range.

Northern Trust Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $1.32, compared to the most recent full-year payment of $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

We Could See Northern Trust's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Northern Trust has grown earnings per share at 8.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Northern Trust Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Northern Trust might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Northern Trust has 2 warning signs (and 1 which is significant) we think you should know about. 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.