FutureFuel (NYSE:FF) Is Paying Out A Dividend Of $0.06

FutureFuel Corp.'s (NYSE:FF) investors are due to receive a payment of $0.06 per share on 18th of June. Based on this payment, the dividend yield will be 4.1%, which is fairly typical for the industry.

Check out our latest analysis for FutureFuel

FutureFuel Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, FutureFuel's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 6.8% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 321%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was $0.48, compared to the most recent full-year payment of $0.24. Doing the maths, this is a decline of about 6.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Is Doubtful

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. FutureFuel has seen earnings per share falling at 6.8% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On FutureFuel's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, FutureFuel has 4 warning signs (and 2 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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