CF Bankshares Inc. (NASDAQ:CFBK) has announced that it will pay a dividend of $0.06 per share on the 27th of October. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.
CF Bankshares' Payment Expected To Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end.
Having paid out dividends for only 3 years, CF Bankshares does not have much of a history being a dividend paying company. While it has a shorter history of paying out dividends, CF Bankshares' payout ratio of 7.6% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
Looking forward, earnings per share is forecast to fall by 13.4% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 9.9%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.
CF Bankshares Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.12 in 2020 to the most recent total annual payment of $0.24. This means that it has been growing its distributions at 26% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that CF Bankshares has grown earnings per share at 39% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like CF Bankshares' Dividend
Overall, we like to see the dividend staying consistent, and we think CF Bankshares might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for CF Bankshares that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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