The board of Northern Trust Corporation (NASDAQ:NTRS) has announced that it will pay a dividend of $0.75 per share on the 1st of January. This means that the annual payment will be 2.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Northern Trust

Northern Trust's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Northern Trust has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Northern Trust's payout ratio of 37% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 13.0%. The future payout ratio could be 38% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Northern Trust Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 4.0% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Northern Trust has the option to increase the payout ratio to return more cash to shareholders.

We Really Like Northern Trust's Dividend

Overall, we like to see the dividend staying consistent, and we think Northern Trust might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Northern Trust (1 is a bit concerning!) 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.