Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see International Society of Northern Technologies (NASDAQ: NTIC) is set to trade off dividend within the next four days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. This means that investors who buy shares of Northern Technologies International from August 3 will not receive the dividend, which will be paid on August 18.
The company’s next dividend payment will be US $ 0.065 per share. Last year, in total, the company distributed US $ 0.26 to shareholders. Based on the value of last year’s payouts, Northern Technologies International has a 1.4% return on the current share price of $ 18.68. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. You have to see if the dividend is covered by profits and if it increases.
See our latest review for Northern Technologies International
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. That’s why it’s good to see Northern Technologies International donate a modest 41% of its profits. Having said that, even very profitable companies can sometimes not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by the cash flow. Dividends consumed 66% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organizations.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to see how much of its profits Northern Technologies International has paid in the past 12 months.
Have profits and dividends increased?
Companies with constantly increasing earnings per share usually make the best dividend-paying stocks because they generally find it easier to increase dividends per share. Investors love dividends, so if profits fall and the dividend is reduced, expect a stock to be sold massively at the same time. With that in mind, we are encouraged by the steady growth of Northern Technologies International, with earnings per share up 9.7% on average over the past five years. While profits have grown at a credible rate, the company is paying the majority of its profits to its shareholders. It is therefore unlikely that the company will be able to reinvest heavily in its business, which could portend slower growth in the future.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Northern Technologies International has generated an average annual increase of 6.8% per annum in its dividend, based on dividend payments for the past four years. It’s encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
The bottom line
Is Northern Technologies International an attractive dividend-paying stock, or rather left on the back burner? Earnings per share have grown at a steady pace, and Northern Technologies International has paid less than half of its earnings and more than half of its free cash flow as dividends over the past year. In summary, Northern Technologies International seems to agree with this analysis, although it does not appear to be an exceptional opportunity.
On that note, you’ll want to research the risks that Northern Technologies International faces. In terms of investment risks, we have identified 1 warning sign with Northern Technologies International and understanding them should be part of your investment process.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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