Capital Bancorp (NASDAQ:CBNK) Is Paying Out A Larger Dividend Than Last Year
Capital Bancorp, Inc.'s (NASDAQ:CBNK) dividend will be increasing from last year's payment of the same period to $0.08 on 23rd of August. Even though the dividend went up, the yield is still quite low at only 1.6%.
See our latest analysis for Capital Bancorp
Capital Bancorp's Earnings Will Easily Cover The Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Capital Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 2-year history of distributing earnings. While it has a shorter history of paying out dividends, Capital Bancorp's payout ratio of 9.9% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
Looking forward, earnings per share is forecast to fall by 4.5% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 10%, which would be comfortable for the company to continue in the future.
Capital Bancorp Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of $0.20 in 2021 to the most recent total annual payment of $0.32. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Capital Bancorp has been growing its earnings per share at 29% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Capital Bancorp's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Capital Bancorp (1 is potentially serious!) that you should be aware of before investing. Is Capital Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
