There's A Lot To Like About Capital One Financial's (NYSE:COF) Upcoming US$0.80 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Capital One Financial Corporation (NYSE:COF) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Capital One Financial's shares before the 16th of November in order to receive the dividend, which the company will pay on the 1st of December.
The company's upcoming dividend is US$0.80 a share, following on from the last 12 months, when the company distributed a total of US$3.20 per share to shareholders. Looking at the last 12 months of distributions, Capital One Financial has a trailing yield of approximately 1.6% on its current stock price of US$195.84. If you buy this business for its dividend, you should have an idea of whether Capital One Financial's dividend is reliable and sustainable. So we need to investigate whether Capital One Financial can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Capital One Financial paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Check out our latest analysis for Capital One Financial
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Capital One Financial has grown its earnings rapidly, up 27% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Capital One Financial has lifted its dividend by approximately 7.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Has Capital One Financial got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Capital One Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 2 warning signs with Capital One Financial and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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