Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cullen/Frost Bankers, Inc. (NYSE:CFR) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 27th of November to receive the dividend, which will be paid on the 15th of December.
Cullen/Frost Bankers's next dividend payment will be US$0.72 per share. Last year, in total, the company distributed US$2.84 to shareholders. Calculating the last year's worth of payments shows that Cullen/Frost Bankers has a trailing yield of 3.4% on the current share price of $83.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Cullen/Frost Bankers is paying out an acceptable 53% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Cullen/Frost Bankers earnings per share are up 4.2% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. 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.
Should investors buy Cullen/Frost Bankers for the upcoming dividend? 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.
However if you're still interested in Cullen/Frost Bankers as a potential investment, you should definitely consider some of the risks involved with Cullen/Frost Bankers. Every company has risks, and we've spotted 2 warning signs for Cullen/Frost Bankers (of which 1 is significant!) you should know about.
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.
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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