Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cullen/Frost Bankers, Inc. (NYSE:CFR) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Cullen/Frost Bankers' shares before the 27th of May in order to receive the dividend, which the company will pay on the 15th of June.
The company's next dividend payment will be US$0.72 per share, on the back of last year when the company paid a total of US$2.88 to shareholders. Looking at the last 12 months of distributions, Cullen/Frost Bankers has a trailing yield of approximately 2.3% on its current stock price of $122.88. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Fortunately Cullen/Frost Bankers's payout ratio is modest, at just 47% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. With that in mind, we're encouraged by the steady growth at Cullen/Frost Bankers, with earnings per share up 7.4% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cullen/Frost Bankers has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy Cullen/Frost Bankers for the upcoming dividend? Cullen/Frost Bankers has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Cullen/Frost Bankers looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Cullen/Frost Bankers has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Cullen/Frost Bankers that we strongly recommend you have a look at before investing in the company.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. 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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