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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cullen/Frost Bankers, Inc. (NYSE:CFR) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 28th of August in order to be eligible for this dividend, which will be paid on the 15th of September.
Cullen/Frost Bankers's next dividend payment will be US$0.71 per share, on the back of last year when the company paid a total of US$2.84 to shareholders. Based on the last year's worth of payments, Cullen/Frost Bankers has a trailing yield of 4.1% on the current stock price of $69.71. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Cullen/Frost Bankers paid out 51% of its earnings to investors last year, a normal payout level for most businesses.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Cullen/Frost Bankers earnings per share are up 5.2% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Cullen/Frost Bankers has lifted its dividend by approximately 5.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has Cullen/Frost Bankers got what it takes to maintain its dividend payments? Cullen/Frost Bankers has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of 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.
If you want to look further into Cullen/Frost Bankers, it's worth knowing the risks this business faces. For example - Cullen/Frost Bankers has 1 warning sign we think you should be aware of.
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.
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.
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