Kearny Financial (NASDAQ:KRNY) Has Announced A Dividend Of $0.11

The board of Kearny Financial Corp. (NASDAQ:KRNY) has announced that it will pay a dividend of $0.11 per share on the 21st of February. This makes the dividend yield 6.1%, which will augment investor returns quite nicely.

View our latest analysis for Kearny Financial

Kearny Financial Not Expected To Earn Enough To Cover Its Payments

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

Kearny Financial has a good history of paying out dividends, with its current track record at 8 years. Past distributions unfortunately do not guarantee future ones, and Kearny Financial's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is worrying for investors of Kearny Financial, as it points towards the dividends being unsustainable in the long term.

Over the next year, EPS is forecast to expand by 23.9%. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 117%, 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. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, 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 24% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Kearny Financial May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Kearny Financial's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

We're Not Big Fans Of Kearny Financial's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. 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. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Kearny Financial that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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