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Important news for shareholders and potential investors in Capital One Financial Corporation (NYSE:COF): The dividend payment of US$0.40 per share will be distributed to shareholders on 22 February 2019, and the stock will begin trading ex-dividend at an earlier date, 08 February 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Capital One Financial can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How does Capital One Financial fare?
The current trailing twelve-month payout ratio for the stock is 13%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect COF’s payout to increase to 16% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.1%. However, EPS is forecasted to fall to $10.98 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Capital One Financial has a yield of 2.0%, which is on the low-side for Consumer Finance stocks.
Keeping in mind the dividend characteristics above, Capital One Financial is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for COF’s future growth? Take a look at our free research report of analyst consensus for COF’s outlook.
- Valuation: What is COF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether COF is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.