Yahoo Finance FutureFuel (NYSE:FF) Will Pay A Dividend Of $0.06
FutureFuel Corp. (NYSE:FF) has announced that it will pay a dividend of $0.06 per share on the 15th of March. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.
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. Investors will be pleased to see that FutureFuel's stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for FutureFuel
FutureFuel's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by FutureFuel's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Unless the company can turn things around, EPS could fall by 3.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 48%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $0.69 in 2013 to the most recent total annual payment of $0.24. Dividend payments have fallen sharply, down 65% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
FutureFuel May Find It Hard To Grow The Dividend
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. In the last five years, FutureFuel's earnings per share has shrunk at approximately 3.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for FutureFuel (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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