Don't Buy Capitol Federal Financial, Inc. (NASDAQ:CFFN) For Its Next Dividend Without Doing These Checks
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Capitol Federal Financial, Inc. (NASDAQ:CFFN) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Capitol Federal Financial's shares before the 10th of June in order to receive the dividend, which the company will pay on the 25th of June.
The company's next dividend payment will be US$0.40 per share. Last year, in total, the company distributed US$0.74 to shareholders. Looking at the last 12 months of distributions, Capitol Federal Financial has a trailing yield of approximately 5.8% on its current stock price of $12.86. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Capitol Federal Financial can afford its dividend, and if the dividend could grow.
View our latest analysis for Capitol Federal Financial
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 (60%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Capitol Federal Financial's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Capitol Federal Financial's dividend payments per share have declined at 3.1% per year on average over the past 10 years, which is uninspiring.
Should investors buy Capitol Federal Financial for the upcoming dividend? Capitol Federal Financial's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
So if you're still interested in Capitol Federal Financial despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Capitol Federal Financial is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
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.
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