The Board of Northrim BanCorp, Inc. (NASDAQ:NRIM) has announced that it will pay its dividend of $0.62 on September 13. This is a higher payment than the comparable dividend paid last year. Based on this payment, the company’s dividend yield will be 3.6%, which is fairly typical for the industry.

Check out our latest analysis for Northrim BanCorp

Northrim BanCorp’s payment is expected to provide solid profit coverage

While a solid dividend yield is nice, it only really helps us if the distribution is sustainable.

Northrim BanCorp has a long history of paying dividends, currently stretching back at least 10 years. Based on Northrim BanCorp’s latest earnings report, the payout ratio is a decent 42%, meaning the company can pay out its dividend with some room to spare.

Earnings per share are expected to decline by 2.7% next year, but if the dividend stays on track, we estimate the payout ratio could be as high as 49%, which would be OK for the company going forward.

Northrim BanCorp has a solid track record

Even over a long history of dividend payments, the company’s payouts have been remarkably stable. The dividend has grown from an annual total of $0.68 in 2014 to the most recent annual total payout of $2.44. This represents a compound annual growth rate (CAGR) of approximately 14% per year over that period. We can see that the payments have shown very nice upward momentum without stalling, which offers some confidence that future payments will be reliable as well.

The dividend is likely to increase

Investors may be attracted to the stock because of its good payment history. Northrim BanCorp has impressed us with earnings growth of 17% per year over the past five years. Earnings are on an upward trend and the company is paying out only a small portion of those earnings to shareholders.

We are very pleased with Northrim BanCorp’s dividend

Overall, a dividend increase is always good, and we believe Northrim BanCorp is a strong dividend stock thanks to its track record and rising earnings. Distributions are easily covered by earnings, and it also generates plenty of cash. We should point out that earnings are expected to decline over the next 12 months, which isn’t a problem if it doesn’t become a trend, but could cause turbulence next year. Taking all of these factors into account, we believe this has solid potential as a dividend stock.

Market movements show how much a consistent dividend policy is valued compared to a more erratic one. At the same time, there are other factors that our readers should be aware of before putting capital into a stock. For example, we have selected the following: 1 warning signal for Northrim BanCorp investors should consider. If you are a dividend investor, you may also want to take a look at our curated list of high dividend stocks.

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