Kentucky First Federal Bancorp (NASDAQ:KFFB) Is Paying Out A Dividend Of $0.10

The board of Kentucky First Federal Bancorp (NASDAQ:KFFB) has announced that it will pay a dividend on the 15th of May, with investors receiving $0.10 per share. The dividend yield will be 6.1% based on this payment which is still above the industry average.

Check out our latest analysis for Kentucky First Federal Bancorp

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Kentucky First Federal Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. 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.

EPS is set to fall by 3.0% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio could reach 261%, 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. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Kentucky First Federal Bancorp has seen earnings per share falling at 3.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Kentucky First Federal Bancorp's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kentucky First Federal Bancorp's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Kentucky First Federal Bancorp that investors should take into consideration. 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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