Yahoo Finance FutureFuel (NYSE:FF) Is Paying Out A Dividend Of $0.06
FutureFuel Corp. (NYSE:FF) has announced that it will pay a dividend of $0.06 per share on the 18th of September. Based on this payment, the dividend yield will be 4.7%, which is fairly typical for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. FutureFuel's stock price has reduced by 35% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
See our latest analysis for FutureFuel
FutureFuel Is Paying Out More Than It Is Earning
We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by FutureFuel's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
EPS is set to fall by 2.0% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 555%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from $0.48 total annually to $0.24. Doing the maths, this is a decline of about 6.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though FutureFuel's EPS has declined at around 2.0% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FutureFuel's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, FutureFuel has 4 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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