Capstar Financial Holdings (NASDAQ:CSTR) Will Pay A Dividend Of US$0.06

Capstar Financial Holdings, Inc.'s (NASDAQ:CSTR) investors are due to receive a payment of US$0.06 per share on 24th of November. This payment means the dividend yield will be 1.0%, which is below the average for the industry.

View our latest analysis for Capstar Financial Holdings

Capstar Financial Holdings' Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Capstar Financial Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 6.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 15%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Capstar Financial Holdings Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The first annual payment during the last 3 years was US$0.16 in 2018, and the most recent fiscal year payment was US$0.24. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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

Investors could be attracted to the stock based on the quality of its payment history. Capstar Financial Holdings has seen EPS rising for the last five years, at 17% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Capstar Financial Holdings' Dividend

Overall, we like to see the dividend staying consistent, and we think Capstar Financial Holdings might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Capstar Financial Holdings that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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.

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