CapStar Financial Holdings (NASDAQ:CSTR) Will Pay A Dividend Of $0.11

CapStar Financial Holdings, Inc. (NASDAQ:CSTR) has announced that it will pay a dividend of $0.11 per share on the 23rd of August. This means the dividend yield will be fairly typical at 3.1%.

Check out our latest analysis for CapStar Financial Holdings

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

CapStar Financial Holdings has a good history of paying out dividends, with its current track record at 5 years. Past distributions do not necessarily guarantee future ones, but CapStar Financial Holdings' payout ratio of 28% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 4.4% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 36%, which would be comfortable for the company to continue in the future.

CapStar Financial Holdings Doesn't Have A Long Payment History

It is great to see that CapStar Financial Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.16 in 2018 to the most recent total annual payment of $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. CapStar Financial Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See CapStar Financial Holdings' Dividend Growing

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 10.0% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

CapStar Financial Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think CapStar Financial Holdings might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for CapStar Financial Holdings (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.