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We Wouldn't Be Too Quick To Buy Capitol Federal Financial, Inc. (NASDAQ:CFFN) Before It Goes Ex-Dividend

Simply Wall St
·3 min read

It looks like Capitol Federal Financial, Inc. (NASDAQ:CFFN) is about to go ex-dividend in the next four days. This means that investors who purchase shares on or after the 5th of November will not receive the dividend, which will be paid on the 20th of November.

Capitol Federal Financial's next dividend payment will be US$0.085 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 stock has a trailing yield of around 4.1% on the current share price of $11.48. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Capitol Federal Financial

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. Capitol Federal Financial paid out more than half (73%) 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.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Capitol Federal Financial's earnings are down 4.1% a year over the past five years.

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 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid Capitol Federal Financial? 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.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Capitol Federal Financial. Every company has risks, and we've spotted 1 warning sign for Capitol Federal Financial 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.