It looks like Capitol Federal Financial, Inc. (NASDAQ:CFFN) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 6th of February, you won't be eligible to receive this dividend, when it is paid on the 21st of February.
Capitol Federal Financial's next dividend payment will be US$0.085 per share, and in the last 12 months, the company paid a total of US$0.93 per share. Calculating the last year's worth of payments shows that Capitol Federal Financial has a trailing yield of 7.1% on the current share price of $13.18. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Capitol Federal Financial can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Capitol Federal Financial's payout ratio is modest, at just 50% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Capitol Federal Financial earnings per share are up 4.2% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Capitol Federal Financial has lifted its dividend by approximately 0.5% a year on average.
Should investors buy Capitol Federal Financial for the upcoming dividend? Capitol Federal Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Capitol Federal Financial more closely.
Wondering what the future holds for Capitol Federal Financial? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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