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

Capitol Federal Financial, Inc. (NASDAQ:CFFN) will pay a dividend of $0.085 on the 16th of February. The dividend yield will be 5.3% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Capitol Federal Financial's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Capitol Federal Financial

Capitol Federal Financial Not Expected To Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Capitol Federal Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is very worrying for shareholders, as this shows that Capitol Federal Financial will not be able to sustain its dividend at its current rate.

Earnings per share is forecast to rise by 130.0% over the next year. If the dividend continues on its recent course, the future payout ratio in 12 months could be 130%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was $1.00, compared to the most recent full-year payment of $0.34. The dividend has fallen 66% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Capitol Federal Financial's EPS has fallen by approximately 26% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Capitol Federal Financial's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Capitol Federal Financial make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Capitol Federal Financial you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of 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.