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

The board of FutureFuel Corp. (NYSE:FF) has announced that it will pay a dividend on the 18th of September, with investors receiving $0.06 per share. This means that the annual payment will be 4.6% of the current stock price, which is in line with the average for the industry.

See our latest analysis for FutureFuel

FutureFuel Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by FutureFuel's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 2.0% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 556%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.48 in 2014, and the most recent fiscal year payment was $0.24. The dividend has shrunk at around 6.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. FutureFuel has seen earnings per share falling at 2.0% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On FutureFuel's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FutureFuel's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, FutureFuel has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is FutureFuel 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.

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