Kearny Financial Corp.'s (NASDAQ:KRNY) investors are due to receive a payment of $0.11 per share on 23rd of August. The dividend yield will be 5.0% based on this payment which is still above the industry average.
Kearny Financial's Earnings Will Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having paid out dividends for 8 years, Kearny Financial has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Kearny Financial's payout ratio of 72% is a good sign for current shareholders as this means that earnings decently cover dividends.
EPS is set to grow by 7.0% over the next year. If recent patterns in the dividend continues, the future payout ratio in 12 months could be 79% which is a bit high but can definitely be sustainable.
Kearny Financial's Dividend Has Lacked Consistency
It's comforting to see that Kearny Financial has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the dividend has gone from $0.08 total annually to $0.44. This means that it has been growing its distributions at 24% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Kearny Financial has impressed us by growing EPS at 25% per year over the past five years. However, Kearny Financial isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Kearny Financial that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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