Readers hoping to buy Cullen/Frost Bankers, Inc. (NYSE:CFR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 29th of August in order to receive the dividend, which the company will pay on the 13th of September.
Cullen/Frost Bankers's next dividend payment will be US$0.71 per share, and in the last 12 months, the company paid a total of US$2.84 per share. Based on the last year's worth of payments, Cullen/Frost Bankers has a trailing yield of 3.5% on the current stock price of $81.91. 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 check whether the dividend payments are covered, and if earnings are 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 paid out a comfortable 38% of its profit last year.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Cullen/Frost Bankers's earnings per share have risen 13% 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. Cullen/Frost Bankers has delivered 5.4% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Cullen/Frost Bankers is keeping back more of its profits to grow the business.
Is Cullen/Frost Bankers worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Cullen/Frost Bankers looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Cullen/Frost Bankers? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.