It looks like National Bank of Canada (TSE:NA) is about to go ex-dividend in the next four days. Investors can purchase shares before the 25th of September in order to be eligible for this dividend, which will be paid on the 1st of November.
National Bank of Canada's next dividend payment will be CA$0.71 per share, and in the last 12 months, the company paid a total of CA$2.84 per share. Last year's total dividend payments show that National Bank of Canada has a trailing yield of 4.1% on the current share price of CA$69.57. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether National Bank of Canada can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. National Bank of Canada paid out a comfortable 47% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see National Bank of Canada earnings per share are up 6.7% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, National Bank of Canada has increased its dividend at approximately 8.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy National Bank of Canada for the upcoming dividend? National Bank of Canada has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, National Bank of Canada looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for National Bank of Canada? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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