Capitol Federal Financial (NASDAQ:CFFN) Is Paying Out A Dividend Of $0.085

Capitol Federal Financial, Inc. (NASDAQ:CFFN) will pay a dividend of $0.085 on the 17th of February. The dividend yield will be 9.8% based on this payment which is still above the industry average.

See our latest analysis for Capitol Federal Financial

Capitol Federal Financial Will Pay Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Capitol Federal Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 58%, which means that Capitol Federal Financial would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 10.0% over the next year. And if the dividend continues along the path it has been on recently, the future payout ratio in 12 months could be 155%, which is definitely a bit high to be sustainable going forward.

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 2013 to the most recent total annual payment of $0.82. This means that it has been growing its distributions at 7.4% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Capitol Federal Financial has seen earnings per share falling at 3.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Capitol Federal Financial is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Capitol Federal Financial is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Capitol Federal Financial has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.