Don't Buy Kentucky First Federal Bancorp (NASDAQ:KFFB) For Its Next Dividend Without Doing These Checks
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kentucky First Federal Bancorp (NASDAQ:KFFB) is about to go ex-dividend in just 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Kentucky First Federal Bancorp investors that purchase the stock on or after the 28th of July will not receive the dividend, which will be paid on the 24th of August.
The company's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Based on the last year's worth of payments, Kentucky First Federal Bancorp has a trailing yield of 6.5% on the current stock price of $6.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Kentucky First Federal Bancorp can afford its dividend, and if the dividend could grow.
See our latest analysis for Kentucky First Federal Bancorp
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Kentucky First Federal Bancorp paid out a disturbingly high 298% 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 strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Kentucky First Federal Bancorp earnings per share are up 3.9% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Kentucky First Federal Bancorp dividends are largely the same as they were 10 years ago.
To Sum It Up
Is Kentucky First Federal Bancorp an attractive dividend stock, or better left on the shelf? Kentucky First Federal Bancorp has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. 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.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Kentucky First Federal Bancorp. Every company has risks, and we've spotted 3 warning signs for Kentucky First Federal Bancorp you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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