FutureFuel (NYSE:FF) Is Due To Pay A Dividend Of $0.06

FutureFuel Corp. (NYSE:FF) has announced that it will pay a dividend of $0.06 per share on the 15th of September. This means the dividend yield will be fairly typical at 2.8%.

See our latest analysis for FutureFuel

FutureFuel's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. 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.

Unless the company can turn things around, EPS could fall by 2.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 21%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $0.69 in 2013 to the most recent total annual payment of $0.24. This works out to a decline of approximately 65% 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.

FutureFuel May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. FutureFuel has seen earnings per share falling at 2.8% 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.

In Summary

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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for FutureFuel you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield 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.