Is It Worth Considering Capitol Federal Financial, Inc. (NASDAQ:CFFN) For Its Upcoming Dividend?

Capitol Federal Financial, Inc. (NASDAQ:CFFN) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 1st of August to receive the dividend, which will be paid on the 16th 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$0.98 to shareholders. Based on the last year’s worth of payments, Capitol Federal Financial has a trailing yield of 7.0% on the current stock price of $14.08. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Capitol Federal Financial can afford its dividend, and if the dividend could grow.

View our latest analysis for Capitol Federal Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Capitol Federal Financial is paying out an acceptable 50% of its profit, a common payout level among most companies.

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.

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

NasdaqGS:CFFN Historical Dividend Yield, July 27th 2019
NasdaqGS:CFFN Historical Dividend Yield, July 27th 2019

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it’s a relief to see Capitol Federal Financial earnings per share are up 7.3% per annum over the last five years.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Capitol Federal Financial has lifted its dividend by approximately 1.0% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Capitol Federal Financial? Capitol Federal Financial has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn’t look like a clear opportunity right now.

Ever wonder what the future holds for Capitol Federal Financial? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.