FutureFuel's (NYSE:FF) Dividend Will Be $0.06

FutureFuel Corp. (NYSE:FF) has announced that it will pay a dividend of $0.06 per share on the 18th of March. This means that the annual payment will be 4.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for FutureFuel

FutureFuel's Future Dividends May Potentially Be At Risk

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, FutureFuel was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Earnings per share could rise by 15.4% 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 272%, 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. There hasn't been much of a change in the dividend over the last 10 years. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

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. FutureFuel has impressed us by growing EPS at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like FutureFuel's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Just as an example, we've come across 2 warning signs for FutureFuel you should be aware of, and 1 of them is a bit unpleasant. Is FutureFuel not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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