Capitol Federal Financial, Inc. (NASDAQ:CFFN) stock is about to trade ex-dividend in four days. Ex-dividend means that investors that purchase the stock on or after the 6th of August will not receive this dividend, which will be paid on the 21st of August.
Capitol Federal Financial’s next dividend payment will be US$0.085 per share, on the back of last year when the company paid a total of US$0.93 to shareholders. Based on the last year’s worth of payments, Capitol Federal Financial has a trailing yield of 9.6% on the current stock price of $9.65. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.
Check out our latest analysis for Capitol Federal Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Capitol Federal Financial is paying out an acceptable 68% 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.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s not ideal to see Capitol Federal Financial’s earnings per share have been shrinking at 2.2% a year over the previous 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 has seen its dividend decline 0.8% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
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.
With that in mind though, if the poor dividend characteristics of Capitol Federal Financial don’t faze you, it’s worth being mindful of the risks involved with this business. 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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