Kearny Financial (NASDAQ:KRNY) Has Affirmed Its Dividend Of $0.11

Kearny Financial Corp. (NASDAQ:KRNY) will pay a dividend of $0.11 on the 22nd of May. This means the annual payment is 7.6% of the current stock price, which is above the average for the industry.

View our latest analysis for Kearny Financial

Kearny Financial Not Expected To Earn Enough To Cover Its Payments

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

Kearny Financial has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Despite this history however, Kearny Financial's latest earnings report actually shows that the company didn't have enough earnings to cover its dividends, paying out more than it earned. This is worrying for investors of Kearny Financial, as it points towards the dividends being unsustainable in the long term.

Earnings per share is forecast to rise by 58.9% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 137%, which probably can't continue putting some pressure on the balance sheet.

Kearny Financial's Dividend Has Lacked Consistency

Looking back, Kearny Financial's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was $0.08, compared to the most recent full-year payment of $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Kearny Financial has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Kearny Financial's earnings per share has shrunk at 11% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Kearny Financial's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Kearny Financial make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Kearny Financial that investors should know about before committing capital to this stock. Is Kearny Financial 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.