Last update on 2024-06-27

Capitol Federal Financial (CFFN) - Dividend Analysis (Final Score: 3/8)

Analyze the stability and performance of Capitol Federal Financial (CFFN) dividend. Get insights on their dividend yield, growth rate, payout ratio, and more.

Short Analysis - Dividend Score: 3

We're running Capitol Federal Financial (CFFN) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Capitol Federal Financial (CFFN) was analyzed using an 8-criteria scoring system for its dividend policy, resulting in a low score of 3. The analysis highlights a high dividend yield of 5.2713%, which is better than the industry average of 2.76%, but a declining stock price raises concerns. The annual dividend growth rate over the past 20 years is negative at -0.25%, showing a decrease rather than growth. Their payout ratio is excessively high at 188.76%, signaling potential financial instability. Although their dividends are generally covered by earnings and cash flow, there were certain years where coverage was insufficient. The dividends have shown significant drops recently, indicating stability issues. CFFN has a record of paying dividends for over 25 years and has engaged in some stock repurchases, but inconsistencies in the latter are also noted.

Insights for Value Investors Seeking Stable Income

Investors looking for stable and growing dividend income might find Capitol Federal Financial (CFFN) risky. While it offers a high dividend yield and has a long history of dividend payments, the declining dividend growth, high payout ratio, and recent instability in dividend payments are concerning. Additionally, the fluctuating stock price adds to the uncertainty. Investors should consider these factors and possibly look for stocks with more consistent and sustainable dividend policies.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the annual dividends paid by a company as a percentage of its stock price. A higher yield can indicate better income for investors.

Capitol Federal Financial (CFFN) boasts a current dividend yield of 5.2713%, which is significantly higher than the industry average of 2.76%. Historically, its dividend yield has fluctuated, peaking at 9.4798% in 2022 and hitting a low of 3.76% in 2020. This continued trend suggests that CFFN is consistent in providing high yield returns, which is beneficial for income-focused investors. However, the drop in the stock price from $16.9722 in 2006 to $6.45 in 2023 indicates underlying concerns about the company's overall growth and sustainability. While the high yield appears attractive, potential investors need to weigh it against the risk of declining stock value.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures how much a company's dividend payments have increased annually over a specific period. A consistent growth rate is crucial for investors seeking reliable income.

Analyzing Capitol Federal Financial's dividend growth rate over the past 20 years reveals a complex and highly volatile pattern. The dividend per share ratio shows significant fluctuations, with values ranging from -58.5366% to 104.2553%. The average dividend growth rate over this period is approximately -0.25%, indicating an overall decline in dividends rather than growth. This downward trend is unfavorable for investors who prioritize stable and increasing dividend income, suggesting inconsistencies in the company's ability to maintain or grow its dividend payouts over the long term.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio indicates the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. A lower payout ratio generally suggests that the company is retaining more earnings for growth and stability, which can be prudent for long-term sustainability. A ratio below 65% is often considered ideal as it indicates a balanced approach between rewarding shareholders and reinvesting in the company.

The payout ratio for Capitol Federal Financial (CFFN) in the past 20 years shows an average of 188.76%, which is significantly higher than the ideal threshold of 65%. The individual annual figures have frequently exceeded this limit, even reaching extremely high values such as 454.49% in 2007 and displaying negative values like -135.14% in 2004. This rightly signals that the company has either overextended its payout capacity in several years or has faced volatile earnings, causing irregular and unsustainable dividend practices. Despite occasional lower figures, the overall inconsistency suggests a negative long-term trend regarding sustainable dividend payouts. This high payout ratio hints toward potential financial instability or a less disciplined fiscal strategy, making it a riskier option for dividend-focused investors.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings ensures that a company can sustainably continue paying dividends without jeopardizing its financial health.

From 2003 to 2023, Capitol Federal Financial's (CFFN) dividends were well covered by earnings most of the years, except for 2004 and 2023, where the coverage ratios were negative (-1.35 and -0.45, respectively). In most years, the coverage ratio was significantly above 1, indicating good dividend coverage. However, sometimes, such as in 2012, 2018, and 2021, the margin was tight. Notably, in 2020, the coverage ratio was quite low at 1.004, showing almost no cushion. Overall, while CFFN has struggled during specific years, their earnings have generally supported dividend payments.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow implies that a company's operating cash flow is sufficient to pay dividends to shareholders. High coverage means financial stability.

In the case of Capitol Federal Financial, we observe variability in the dividend coverage by free cash flow over the years. For example, the ratio hits a low of 0.097 in 2007 indicating poor coverage, while peaks are seen in 2011 and 2023 at 2.830 and 2.016 respectively. The positive trend in later years suggests better financial health, as a ratio above 1 indicates that the company generates enough free cash flow to comfortably cover its dividend payments. Overall, recent higher ratios are a good indicator for investors.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Considering Capitol Federal Financial (CFFN)'s historical dividend data over the last 20 years, it is clear that dividend stability has been an issue, particularly in the more recent years. In 2020, the company's dividend per share dropped sharply to $0.47 from $0.93, resulting in nearly a 50% decline, which entirely contradicts the 20% stability criterion. Another significant drop is observed in 2023 when dividends fell to $0.34 from $0.82 in 2022, marking almost a 59% reduction. Such volatility raises concerns for income-seeking investors as it indicates inconsistency in the company's ability to generate stable free cash flow or manage business pressures effectively. The fluctuations observed could be a result of external economic pressures or internal financial management issues. Regardless, the sharp reductions present a strong signal to investors that reliance on consistent dividend income from CFFN may be risky.

Dividends Paid for Over 25 Years?

This criterion examines whether Capitol Federal Financial has been able to maintain a consistent record of paying dividends for more than 25 years. It is important because it indicates the reliability and stability of the company's ability to return profits to shareholders over the long term.

The dataset shows that Capitol Federal Financial has paid dividends consistently for the past 25 years since 1999. Starting from zero in 1998, the company began paying dividends in 1999 and has continued to do so every year without fail. The upward trend in dividend per share peaking at 1.016 in several years and reducing in recent years to 0.34 in 2023 reflects both management's commitment to rewarding shareholders and adjusting payouts reflective of profitability and possibly strategic reinvestments. This trend, although recently downward, is fundamentally positive as it establishes a long-term reliability which bodes well for shareholder confidence.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Analyzing the number of shares from 2003 to 2023 for Capitol Federal Financial (CFFN) shows fluctuations in share count. The company managed to repurchase shares in several years, visible in the drop from around 163 million shares in 2003 to approximately 134 million shares by 2023. The years of consistent repurchases indicate a commitment to returning value to shareholders. The average repurchase rate of -0.9822% suggests a slight reduction in outstanding shares year-over-year. However, the share count inconsistencies point to an inconsistent repurchase policy. This mixed trend raises questions about the reliability of future repurchases and their impact on shareholder value.