Dividend Still Enticing At Capitol Federal Financial

Capitol Federal Financial (Nasdaq: CFFN) is a sleeper that has returned more than most of my very few investments. The Kansas-based bank has a different strategy that isn't favorable to traditional performance metrics, but then again that's probably why it has been able to deliver above-average shareholder returns. Shares are more expensive, and the special dividend produces a lower yield than it did when I first wrote about the bank in 2015, but there's still a lot to like, and the balance sheet continues to move in the right direction. With that said, new investors may want to pass and look for a company in a better position for a rising rate environment, but for those looking for yield, this is still a unique opportunity to consider.
Evolution of a Special Dividend
Note to Reader, the links to financial docs keep breaking. To access the documents referenced please go here.
The dividend story here still goes back to the bank's large second-step conversion that was completed in 2011. CFFN raised $1.2 billion that year, and since then has reported a chart-topping equity to asset ratio of 15%. This is down from 15.2% at the end of 2015, and it will continue to draw down as assets rise and the bank maintains its plans to pay out 100% of earnings in dividends. This will be unsustainable at a certain point, which is probably why some investors will stay away, but the "bleeding" of capital has slowed.
After the second step, CFFN initiates a large... Read more

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