Capital One Financial (NYSE:COF) Is Paying Out A Dividend Of $0.60

The board of Capital One Financial Corporation (NYSE:COF) has announced that it will pay a dividend of $0.60 per share on the 24th of May. This payment means that the dividend yield will be 1.7%, which is around the industry average.

See our latest analysis for Capital One Financial

Capital One Financial's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Capital One Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 19% also shows that Capital One Financial is able to comfortably pay dividends.

Over the next 3 years, EPS is forecast to expand by 33.4%. Analysts estimate the future payout ratio will be 17% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was $1.20, compared to the most recent full-year payment of $2.40. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Capital One Financial's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Capital One Financial could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, a consistent dividend is a good thing, and we think that Capital One Financial has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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 2 warning signs for Capital One Financial that investors need to be conscious of moving forward. Is Capital One Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.