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Capital One: Bank on Dividends
07/20/2016 8:00 am EST
Our latest featured dividend reinvestment stock was founded in 1994 in Richmond, Virginia; it offers a range of financial products and services, primarily credit card, consumer and commercial banking, notes Vita Nelson, editor of Direct Investing.
Capital One Financial (COF) is a member of the Fortune 500, and also conducts business in Canada and the United Kingdom. It is a large cap stock and its history of consistent earnings growth makes it a solid company.
Consensus estimates call for the company to earn about $7.54 per share this year, up from $7.15 per share in 2015, and to go to net about $8.18 per share in 2017.
Capital One has paid dividends to investors since 1995, and has increased its payments for 3 consecutive years.
During those last 3 years it has increased its dividends at an average rate of 66%, and its quarterly payment of $0.40 currently provides a yield of 2.68%.
A hypothetical investment in Capital One has grown cumulatively (including dividends reinvested) 1,318% since November 1994. The same investment has grown 1,073.72% in the same period of time, excluding dividends.
The stock exhibits a healthy Dividend Payout Ratio (the proportion of earnings paid out as dividends to shareholders) of 23%.
This means the company is paying out 23% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business.
Its price to earnings ratio of 8.7 is 44.2% below its industry average, its price to book ratio of 0.6 is 77.8% below its industry average and its price to sales ratio of 1.3 is 58.0% below its industry average.
According to Morningstar, the stock is trading 34.9% below its Fair Value Estimate, making it very attractive for long-term investors.
Technically — from a chart’s perspective — COF also looks attractive, trading 32.8% below its 52 weeks high, while it is forming a price consolidation pattern between $58 and $92.
COF’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, safekeeping or termination of the plan.
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