It looks like Capitol Federal Financial, Inc. (NASDAQ:CFFN) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 19th of November, you won't be eligible to receive this dividend, when it is paid on the 4th of December.
Capitol Federal Financial's next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.47 per share. Based on the last year's worth of payments, Capitol Federal Financial has a trailing yield of 3.7% on the current stock price of $12.67. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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 (73%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Capitol Federal Financial's earnings per share have been shrinking at 4.1% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Capitol Federal Financial's dividend payments per share have declined at 7.4% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Has Capitol Federal Financial got what it takes to maintain its dividend payments? We're not overly enthused to see Capitol Federal Financial's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Capitol Federal Financial doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Although, if you're still interested in Capitol Federal Financial and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 2 warning signs for Capitol Federal Financial and you should be aware of them before buying any shares.
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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