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

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Flushing Financial Corporation (NASDAQ:FFIC) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Flushing Financial's shares before the 5th of September in order to be eligible for the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be US$0.22 per share, on the back of last year when the company paid a total of US$0.88 to shareholders. Based on the last year's worth of payments, Flushing Financial stock has a trailing yield of around 6.4% on the current share price of US$13.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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 lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.

View our latest analysis for Flushing Financial

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Flushing Financial reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Flushing Financial also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Flushing Financial has delivered an average of 3.9% per year annual increase in its dividend, based on the past 10 years of dividend payments.

We update our analysis on Flushing Financial every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Flushing Financial worth buying for its dividend? It's hard to get past the idea of Flushing Financial paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Flushing Financial as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 2 warning signs for Flushing Financial that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.