Yahoo Finance CapStar Financial Holdings (NASDAQ:CSTR) Is Increasing Its Dividend To US$0.10
The board of CapStar Financial Holdings, Inc. (NASDAQ:CSTR) has announced that it will be increasing its dividend on the 25th of May to US$0.10. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for CapStar Financial Holdings
CapStar Financial Holdings' Earnings Easily Cover the Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, CapStar Financial Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 9.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 18%, which is comfortable for the company to continue in the future.
CapStar Financial Holdings Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The first annual payment during the last 4 years was US$0.16 in 2018, and the most recent fiscal year payment was US$0.40. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. CapStar Financial Holdings has seen EPS rising for the last five years, at 23% per annum. 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 CapStar Financial Holdings' Dividend
Overall, a dividend increase is always good, and we think that CapStar Financial Holdings is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for CapStar Financial Holdings 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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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.
