Here's Why We're Wary Of Buying Flushing Financial's (NASDAQ:FFIC) For Its Upcoming Dividend

It looks like Flushing Financial Corporation (NASDAQ:FFIC) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 11th of March will not receive this dividend, which will be paid on the 26th of March.

Flushing Financial's next dividend payment will be US$0.21 per share. Last year, in total, the company distributed US$0.84 to shareholders. Looking at the last 12 months of distributions, Flushing Financial has a trailing yield of approximately 3.7% on its current stock price of $22.65. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Flushing Financial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Flushing Financial is paying out an acceptable 71% of its profit, a common payout level among most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Flushing Financial's earnings per share have fallen at approximately 5.7% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Flushing Financial has lifted its dividend by approximately 4.9% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Is Flushing Financial an attractive dividend stock, or better left on the shelf? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that in mind though, if the poor dividend characteristics of Flushing Financial don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 2 warning signs for Flushing Financial that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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