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Northern Star Resources Limited (ASX:NST) is set to trade ex-dividend in just few days. The ex-dividend date is a critical marker for investors, as it determines who is eligible to receive the upcoming dividend payment. For Northern Star Resources, the ex-dividend date falls on the 3rd of September, meaning that any purchase of the stock on or after this date will not qualify for the dividend, which will be paid out on the 26th of September. The forthcoming dividend payment is AU$0.25 per share.
Over the past year, Northern Star Resources has distributed a total of AU$0.40 per share to its shareholders, translating to a trailing yield of approximately 2.7% based on the current stock price of AU$15.07. For income-focused investors, this yield is an attractive feature, but it’s crucial to examine the sustainability and growth potential of the dividend to ensure that the company is not overstretching its financial resources.
Dividend Sustainability and Coverage
Dividends are usually paid from a company's earnings, making it vital to ensure that these payouts are sustainable. Northern Star Resources paid out 72% of its earnings as dividends last year, which is a standard level for many businesses. This payout ratio suggests that the company retains enough of its earnings to reinvest in its operations while rewarding shareholders.
More important than earnings, however, is cash flow. A company's ability to generate sufficient cash to cover its dividends is a stronger indicator of sustainability. In the case of Northern Star Resources, the company paid out 53% of its free cash flow as dividends over the last year. This is within the typical range for most companies and suggests that Northern Star’s dividend is well-covered by its cash flow, adding an extra layer of security for investors.
Earnings Growth and Dividend Potential
The long-term viability of a dividend often hinges on a company's ability to grow its earnings. Northern Star Resources has demonstrated strong earnings growth, with earnings per share (EPS) increasing by 18% per year over the last five years. This growth rate is promising, as companies that consistently grow their earnings are better positioned to maintain or increase their dividend payouts.
In terms of dividend growth, Northern Star Resources has also shown impressive performance. Over the past decade, the company has increased its dividend by an average of 28% per year. The combination of robust earnings growth and consistent dividend increases suggests that Northern Star Resources could continue to reward its shareholders with rising dividends in the future.
