Capitol Federal Financial, Inc. (NASDAQ:CFFN) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 1st of August in order to receive the dividend, which the company will pay on the 16th of August.
Capitol Federal Financial's next dividend payment will be US$0.085 per share, on the back of last year when the company paid a total of US$0.98 to shareholders. Looking at the last 12 months of distributions, Capitol Federal Financial has a trailing yield of approximately 7.0% on its current stock price of $14.08. 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. Capitol Federal Financial paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Capitol Federal Financial, with earnings per share up 7.3% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Capitol Federal Financial has lifted its dividend by approximately 1.0% a year on average.
To Sum It Up
Is Capitol Federal Financial an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
Ever wonder 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
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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