It looks like Capstar Financial Holdings, Inc. (NASDAQ:CSTR) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 9th of August, you won't be eligible to receive this dividend, when it is paid on the 26th of August.
Capstar Financial Holdings's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.20 per share to shareholders. Last year's total dividend payments show that Capstar Financial Holdings has a trailing yield of 1.3% on the current share price of $15.74. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Capstar Financial Holdings has been able to grow its dividends, or if the dividend might be cut.
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. Capstar Financial Holdings has a low and conservative payout ratio of just 22% of its income after tax.
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?
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Capstar Financial Holdings, with earnings per share up 2.1% on average over the last five years.
Given that Capstar Financial Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Should investors buy Capstar Financial Holdings for the upcoming dividend? Capstar Financial Holdings has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Capstar Financial Holdings more closely.
Wondering what the future holds for Capstar Financial Holdings? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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