Kentucky First Federal Bancorp (NASDAQ:KFFB) Is Due To Pay A Dividend Of $0.10

The board of Kentucky First Federal Bancorp (NASDAQ:KFFB) has announced that it will pay a dividend on the 24th of August, with investors receiving $0.10 per share. This makes the dividend yield 6.5%, which will augment investor returns quite nicely.

Check out our latest analysis for Kentucky First Federal Bancorp

Kentucky First Federal Bancorp Will Pay Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Kentucky First Federal Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions unfortunately do not guarantee future ones, and Kentucky First Federal Bancorp's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is very worrying for shareholders, as this shows that Kentucky First Federal Bancorp will not be able to sustain its dividend at its current rate.

Looking forward, EPS could fall by 5.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the future payout ratio could reach 313%, which could put the dividend in jeopardy if the company's earnings don't improve.

Kentucky First Federal Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The most recent annual payment of $0.40 is about the same as the annual payment 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Kentucky First Federal Bancorp's earnings per share has fallen at approximately 5.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Kentucky First Federal Bancorp that investors should know about before committing capital to this stock. Is Kentucky First Federal Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.