Read This Before Buying Capstead Mortgage Corporation (NYSE:CMO) For Its Upcoming US$0.14 Dividend

Attention dividend hunters! Capstead Mortgage Corporation (NYSE:CMO) will be distributing its dividend of US$0.14 per share on the 20 July 2018, and will start trading ex-dividend in 2 days time on the 28 June 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Capstead Mortgage’s latest financial data to analyse its dividend characteristics. See our latest analysis for Capstead Mortgage

5 checks you should use to assess a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has it increased its dividend per share amount over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

NYSE:CMO Historical Dividend Yield June 25th 18

How well does Capstead Mortgage fit our criteria?

REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. The company currently pays out 123.56% of its earnings as a dividend, according to its trailing twelve-month data, meaning that a portion of dividend payments are funded by retained earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from Capstead Mortgage have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.

Relative to peers, Capstead Mortgage generates a yield of 6.09%, which is on the low-side for Mortgage REITs stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Capstead Mortgage for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for CMO’s future growth? Take a look at our free research report of analyst consensus for CMO’s outlook.

2. Historical Performance: What has CMO’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.