FutureFuel (NYSE:FF) Is Paying Out 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 March. The dividend yield will be 2.7% based on this payment which is still above the industry average.

View our latest analysis for FutureFuel

FutureFuel's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by FutureFuel's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 3.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 48%, which is definitely feasible to continue.

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 $0.69 in 2013, and the most recent fiscal year payment was $0.24. The dividend has fallen 65% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

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. Over the past five years, it looks as though FutureFuel's EPS has declined at around 3.0% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, FutureFuel has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.