FutureFuel (NYSE:FF) Will 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 18th of December. The dividend yield will be 6.2% based on this payment which is still above the industry average.

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FutureFuel's Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though FutureFuel is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share could 33.8% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

View our latest analysis for FutureFuel

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. There hasn't been much of a change in the dividend over the last 10 years. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. FutureFuel's earnings per share has shrunk at 34% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

FutureFuel's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help FutureFuel make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for FutureFuel that investors should take into consideration. Is FutureFuel not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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