Read This Before Considering Kentucky First Federal Bancorp (NASDAQ:KFFB) For Its Upcoming US$0.10 Dividend

Readers hoping to buy Kentucky First Federal Bancorp (NASDAQ:KFFB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Kentucky First Federal Bancorp's shares before the 28th of April in order to be eligible for the dividend, which will be paid on the 16th of May.

The company's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Calculating the last year's worth of payments shows that Kentucky First Federal Bancorp has a trailing yield of 5.5% on the current share price of $7.3062. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Kentucky First Federal Bancorp can afford its dividend, and if the dividend could grow.

View our latest analysis for Kentucky First Federal Bancorp

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kentucky First Federal Bancorp distributed an unsustainably high 148% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see how much of its profit Kentucky First Federal Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Kentucky First Federal Bancorp, with earnings per share up 8.4% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kentucky First Federal Bancorp's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Has Kentucky First Federal Bancorp got what it takes to maintain its dividend payments? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 148% of last year's earnings. 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 Kentucky First Federal Bancorp as an investment, you'll find it beneficial to know what risks this stock is facing. For example - Kentucky First Federal Bancorp has 2 warning signs we think you should be aware of.

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.