It looks like Central Pacific Financial Corp. (NYSE:CPF) is about to go ex-dividend in the next 4 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Central Pacific Financial’s shares on or after the 28th of November will not receive the dividend, which will be paid on the 15th of December.
The company’s next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.12 to shareholders. Calculating the last year’s worth of payments shows that Central Pacific Financial has a trailing yield of 3.8% on the current share price of US$29.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Central Pacific Financial has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Central Pacific Financial paid out a comfortable 44% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
See our latest analysis for Central Pacific Financial
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re encouraged by the steady growth at Central Pacific Financial, with earnings per share up 3.7% on average over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Central Pacific Financial has lifted its dividend by approximately 8.8% 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.