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

FutureFuel Corp.'s (NYSE:FF) investors are due to receive a payment of $0.06 per share on 15th of December. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

See our latest analysis for FutureFuel

FutureFuel's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. But before making this announcement, FutureFuel's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Unless the company can turn things around, EPS could fall by 7.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 25%, 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

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 2013, the dividend has gone from $0.69 total annually to $0.24. This works out to a decline of approximately 65% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

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. Over the past five years, it looks as though FutureFuel's EPS has declined at around 7.3% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On FutureFuel's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While FutureFuel is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think FutureFuel is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for FutureFuel (of which 2 are a bit unpleasant!) you should know about. 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.