Kearny Financial (NASDAQ:KRNY) Is Due To Pay A Dividend Of $0.11

Kearny Financial Corp. (NASDAQ:KRNY) will pay a dividend of $0.11 on the 23rd of August. The dividend yield will be 5.1% based on this payment which is still above the industry average.

Check out our latest analysis for Kearny Financial

Kearny Financial Will Pay Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Kearny Financial has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Kearny Financial's payout ratio of 72% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 22.5% over the next year. And assuming the dividend continues along recent trends, we believe the future payout ratio could reach 109%, which could put the dividend under pressure if earnings don't start to improve.

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. The dividend has gone from an annual total of $0.08 in 2015 to the most recent total annual payment of $0.44. This means that it has been growing its distributions at 24% per annum 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Kearny Financial has been growing its earnings per share at 25% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Kearny Financial is not retaining those earnings to reinvest in growth.

Our Thoughts On Kearny Financial's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kearny Financial's payments, as there could be some issues with sustaining them into the future. While Kearny Financial is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Kearny Financial is a great stock to add to your portfolio if income is your focus.

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 2 warning signs for Kearny Financial 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.