Capitol Federal Financial (NASDAQ:CFFN) Is Due To Pay A Dividend Of $0.085

The board of Capitol Federal Financial, Inc. (NASDAQ:CFFN) has announced that it will pay a dividend of $0.085 per share on the 19th of August. This payment means the dividend yield will be 3.6%, which is below the average for the industry.

See our latest analysis for Capitol Federal Financial

Capitol Federal Financial Will Pay Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Capitol Federal Financial has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Capitol Federal Financial's payout ratio of 57% is a good sign as this means that earnings decently cover dividends.

EPS is set to fall by 0.9% over the next 12 months. And if the dividend continues along recent trends, we estimate the future payout ratio could reach 129%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $0.40 in 2012 to the most recent total annual payment of $0.34. This works out to be a decline of approximately 1.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Capitol Federal Financial's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Capitol Federal Financial (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.