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 of $0.06 per share on the 18th of September. Based on this payment, the dividend yield will be 4.0%, which is fairly typical for the industry.

View our latest analysis for FutureFuel

FutureFuel Is Paying Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, FutureFuel was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Earnings per share could rise by 14.4% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 246%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut 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. This works out to be a decline of approximately 6.7% per year over that time. 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 Looks Likely To Grow

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 EPS rising for the last five years, at 14% per annum. FutureFuel definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like FutureFuel's Dividend

Overall, we like to see the dividend staying consistent, and we think FutureFuel might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for FutureFuel you should be aware of, and 1 of them shouldn't be ignored. 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.