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The board of Flushing Financial Corporation (NASDAQ:FFIC) has announced that it will pay a dividend on the 28th of March, with investors receiving $0.22 per share. This makes the dividend yield 6.1%, which will augment investor returns quite nicely.
Check out our latest analysis for Flushing Financial
Flushing Financial's Payment Expected To Have Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Having distributed dividends for at least 10 years, Flushing Financial has a long history of paying out a part of its earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is an alarming sign that could mean that Flushing Financial's dividend at its current rate may no longer be sustainable for longer.
According to analysts, EPS should be several times higher in the next 3 years. In addtion, they also estimate the future payout ratio could reach 60% in the same time period, which we would be comfortable to see continuing.
Flushing Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $0.60 total annually to $0.88. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Flushing Financial's EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
We should note that Flushing Financial has issued stock equal to 17% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Flushing Financial is a great stock to add to your portfolio if income is your focus.