Kearny Financial (NASDAQ:KRNY) Is Paying Out 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 26th of February. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

View our latest analysis for Kearny Financial

Kearny Financial Will Pay Out More Than It Is Earning

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

Kearny Financial has a good history of paying out dividends, with its current track record at 9 years. But while this history shows that Kearny Financial was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company's net income wasn't enough to cover dividends. This is an alarming sign for the sustainability of its dividends, as it may mean that Kearny Financialis pulling cash from elsewhere to keep its shareholders happy.

Earnings per share is forecast to rise by 145.5% over the next year. If the dividend continues on its recent course, the future payout ratio in 12 months could be 103%, which is a bit high and could start applying pressure to the balance sheet.

Kearny Financial's Dividend Has Lacked Consistency

Kearny Financial has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was $0.08 in 2016, and the most recent fiscal year payment was $0.44. This means that it has been growing its distributions at 21% 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 Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 38% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

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

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. 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. The dividend doesn't inspire confidence that it will provide solid income in the future.

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 1 warning sign 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.

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.