CapStar Financial Holdings (NASDAQ:CSTR) Is Paying Out A Dividend Of $0.11

The board of CapStar Financial Holdings, Inc. (NASDAQ:CSTR) has announced that it will pay a dividend of $0.11 per share on the 24th of May. This payment means that the dividend yield will be 3.4%, which is around the industry average.

Check out our latest analysis for CapStar Financial Holdings

CapStar Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

CapStar Financial Holdings has a good history of paying out dividends, with its current track record at 5 years. Taking data from its last earnings report, calculating for the company's payout ratio of 26%shows that CapStar Financial Holdings would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 3.6%. If the dividend continues on this path, the future payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

CapStar Financial Holdings Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the annual payment back then was $0.16, compared to the most recent full-year payment of $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that CapStar Financial Holdings has grown earnings per share at 34% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

CapStar Financial Holdings Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for CapStar Financial Holdings that investors need to be conscious of moving forward. 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.