FutureFuel (NYSE:FF) Will Pay 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 15th of September. Based on this payment, the dividend yield on the company's stock will be 3.3%, which is an attractive boost to shareholder returns.

View our latest analysis for FutureFuel

FutureFuel's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, based ont he last payment, FutureFuel was earning enough to cover the dividend pretty comfortably. 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 the path it has been on recently, we estimate the payout ratio could be 25%, which is definitely feasible to continue.

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. The dividend has gone from an annual total of $0.69 in 2013 to the most recent total annual payment of $0.24. Dividend payments have fallen sharply, down 65% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. In the last five years, FutureFuel's earnings per share has shrunk at approximately 7.3% per annum. 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.

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. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for FutureFuel (2 are a bit unpleasant!) that you should be aware of before investing. 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.