There's A Lot To Like About Capital Bancorp's (NASDAQ:CBNK) Upcoming US$0.10 Dividend

Capital Bancorp, Inc. (NASDAQ:CBNK) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. In other words, investors can purchase Capital Bancorp's shares before the 12th of May in order to be eligible for the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Based on the last year's worth of payments, Capital Bancorp has a trailing yield of 1.3% on the current stock price of US$31.71. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Our free stock report includes 2 warning signs investors should be aware of before investing in Capital Bancorp. Read for free now.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Capital Bancorp paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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.

See our latest analysis for Capital Bancorp

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Capital Bancorp's earnings per share have been growing at 13% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past four years, Capital Bancorp has increased its dividend at approximately 19% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Capital Bancorp worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Capital Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Capital Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Capital Bancorp has 2 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.