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 its latest share-buyback plan with authorization to repurchase 3.5 million shares through Feb 28, 2021.
Notably, the new plan will come into effect once Butterfield completes the previous authorization of 2.5 million ordinary shares, announced last December. The existing plan has around 225,000 shares remaining.
Butterfield has also been paying quarterly dividends, along with regular hikes. Since 2016, the company has raised its dividend four times. The dividend was last hiked in February 2019 by 15.8% to 44 cents per share.
With strong liquidity and balance-sheet position, we believe Butterfield will keep rewarding its shareholders in the upcoming period as well. 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 10.5% over the four-year period (2015-2018). The company’s projected sales growth (F1/F0) of 4.67% (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 recorded average positive earnings surprise of 2.82% over the trailing four quarters.
Superior Return on Equity: Butterfield has a return on equity of 22.09% compared with the industry average of 11.4%. This indicates that the company is efficient in utilizing shareholder funds.
Strong Leverage: Butterfield’s debt/equity ratio is valued at 0.15 compared with the industry average of 0.80, indicating a relatively lower debt burden. It highlights the company’s financial stability.
Butterfield’s shares have depreciated around 2.5% on the NYSE, in the past six months, compared with the industry’s decline of 1.9%. Despite a dismal price performance, the 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 10.34 compared with the industry’s average of 9.99. Furthermore, the company’s P/B ratio of 1.96 comes in above the industry average of 0.91. The stock currently carries a Zacks Rank #4 (Sell).
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