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Capital One Financial Corporation (NYSE:COF) Looks Interesting, And It's About To Pay A Dividend

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·3 min read
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Capital One Financial Corporation (NYSE:COF) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 14th of May to receive the dividend, which will be paid on the 28th of May.

Capital One Financial's next dividend payment will be US$0.40 per share, and in the last 12 months, the company paid a total of US$1.60 per share. Calculating the last year's worth of payments shows that Capital One Financial has a trailing yield of 1.0% on the current share price of $157.71. If you buy this business for its dividend, you should have an idea of whether Capital One Financial's dividend is reliable and sustainable. So we need to investigate whether Capital One Financial can afford its dividend, and if the dividend could grow.

See our latest analysis for Capital One Financial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Capital One Financial is paying out just 6.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Capital One Financial's earnings per share have been growing at 17% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Capital One Financial has lifted its dividend by approximately 23% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Capital One Financial worth buying for its dividend? Companies like Capital One Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Capital One Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Capital One Financial for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 4 warning signs for Capital One Financial (1 shouldn't be ignored) you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.