Capital One Financial Corporation stock has struggled this year amid the coronavirus pandemic. Banking institutions are feeling the heat as interest rates have declined. Many companies have either suspended or reduced their dividend payments. Their businesses have been hit hard by the COVID-19 pandemic. Where does Capital One stand when it comes to dividend payments? Does the company still pay dividends to its shareholders?
Does Capital One stock still pay dividends?
Capital One still pays dividends. Based on Capital One’s dividend history, the company has paid quarterly cash dividends since its inception in 1994. The company has paid quarterly cash dividends of $0.40 per share over the last five years. Dividend stocks offer passive income to investors.
However, Capital One lowered its dividend by 75 percent to $0.10 per share for the third quarter of 2020. The dividend will be paid on August 20 to shareholders of record as of August 10. This is the first dividend cut for the bank since 2009.
The dividend cut is in line with the Federal Reserve’s requirements on common stock dividend payments. The Federal Reserve said that the dividend payments for the third quarter might not exceed the average net income for the previous four quarters. If the Fed retains the dividend policy through the fourth quarter, Capital One would need to earn approximately $1.1 billion in the third quarter, as reported by The Wall Street Journal.
Will Capital One continue to pay dividends?
The earnings of $1.1 billion for the third quarter would represent a turnaround for Capital One from net losses in the previous two quarters. The company reported net losses of $918 million and $1.3 billion for the second quarter and first quarter, respectively. The company swung to net losses as it set aside an increased provision for credit losses due to the economic downturn amid COVID-19.
During the second-quarter earnings conference call, Capital One CEO Richard Fairbank said, “We don't know how that income limitation test is going to work if they're going to continue it on, you know that they've instituted a fall stress test for all of the 33 banks in CCAR. So, I'm not going to give a guide on where the dividend is going to be next quarter. We're committed to continuing to have a dividend.”
How to buy Capital One stock
First, you need to decide how much you want to invest in Capital One stock based on its current market price. Then, you need to find a broker licensed to trade on the New York Stock Exchange. Beginners can invest through the Robinhood platform. Robinhood offers commission-free trading of U.S. stocks.
Is Capital One stock a good buy?
Capital One stock will likely provide below-average returns compared to the market in the next few months. So far, 2020 has been a tough year for Capital One. The company reported two consecutive quarters of net losses and reduced its dividend payments for the third quarter. The COVID-19 pandemic has put pressure on banking stocks like Capital One. Amid the uncertainty, investors should consider waiting for a few quarters before buying Capital One stock.
Capital One stock lost about 63 percent and fell from $102.91 at the end of 2019 to around $38 in mid-March. The stock spiked around 78 percent to around $67.64 currently. Despite the recent rally, Capital One stock remains 34.3 percent below the level at the beginning of the year.