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CF Bankshares Inc. (NASDAQ:CFBK) will increase its dividend on the 26th of July to US$0.05. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for CF Bankshares
CF Bankshares' Earnings Easily Cover the Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, CF Bankshares' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 9.8%. If the dividend continues on this path, the payout ratio could be 6.1% by next year, which we think can be pretty sustainable going forward.
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 2 years, which isn't that long in the grand scheme of things. The first annual payment during the last 2 years was US$0.12 in 2020, and the most recent fiscal year payment was US$0.20. This means that it has been growing its distributions at 29% 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
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. CF Bankshares has impressed us by growing EPS at 54% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like CF Bankshares' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in CF Bankshares stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.