It Might Be Better To Avoid Kentucky First Federal Bancorp's (NASDAQ:KFFB) Upcoming Dividend
It looks like Kentucky First Federal Bancorp (NASDAQ:KFFB) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 30th of January will not receive the dividend, which will be paid on the 18th of February.
Kentucky First Federal Bancorp's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Looking at the last 12 months of distributions, Kentucky First Federal Bancorp has a trailing yield of approximately 5.1% on its current stock price of $7.84. If you buy this business for its dividend, you should have an idea of whether Kentucky First Federal Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Kentucky First Federal Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kentucky First Federal Bancorp paid out a disturbingly high 366% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Click here to see how much of its profit Kentucky First Federal Bancorp paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Kentucky First Federal Bancorp's earnings per share have dropped 14% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kentucky First Federal Bancorp's dividend payments are broadly unchanged compared to where they were ten years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
The Bottom Line
Is Kentucky First Federal Bancorp worth buying for its dividend? Not only are earnings per share shrinking, but Kentucky First Federal Bancorp is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. Kentucky First Federal Bancorp doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Keen to explore more data on Kentucky First Federal Bancorp's financial performance? Check out our visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
