Bank of N.T. Butterfield & Son Limited (NTB - Free Report) continues to reward its shareholders through dividend hikes or additional share repurchases. The company recently announced a new share-buyback plan with authorization to repurchase 2.5 million shares through Feb 29, 2020.
Recently, Butterfield completed previous authorization by repurchase of 1 million ordinary shares, at a weighted average price of $40.15. Notably, the plan was announced in April 2018.
Notably, Butterfield has also been paying quarterly dividends, along with regular hikes. Since 2016, the company has raised its dividend thrice. The dividend was last hiked in February 2018 by 18.75% to 38 cents per share.
With strong liquidity and balance-sheet position, we believe Butterfield will continue to reward its shareholders, moving ahead. So, keeping this in mind, is the company worth considering? Let’s dig deeper into its financials and fundamental strengths.
Revenue Growth: Organic growth is a key driver for Butterfield, with its sales witnessing a compound annual growth rate of 8.4% over the three-year period (2015-2017). The company’s projected sales growth (F1/F0) of 13.88% (against nil industry average) indicates continued improvement in revenues.
Earnings Strength: Butterfield’s long-term (three-five years) estimated EPS growth rate of 6% promises rewards for investors, over the long run. Also, the company’s projected earnings growth of 13.88% for 2019 indicates continued improvement in earnings.
Superior Return on Equity: Butterfield has a return on equity of 22.33% compared with the industry average of 10.69%. This indicates that the company is efficient in utilizing shareholder funds.
Strong Leverage: Butterfield’s debt/equity ratio is valued at 0.16 compared with the industry average of 0.90, indicating relative lower debt burden. It highlights the financial stability of the company.
Butterfield’s shares have depreciated around 25.9% on the NYSE, in the past six months, compared with the industry’s decline of 10.9%. Despite a dismal price performance, Butterfield’s stock looks overvalued, with respect to its price-to-earnings (P/E) and price-to-book (P/B) ratios. It has a P/E (F1) ratio of nearly 9.94 compared with the industry average of 9.65. Furthermore, the company’s P/B ratio of 2.2 comes in above the industry average of 0.89. The stock currently carries a Zacks Rank #4 (Sell).
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