The board of Kearny Financial Corp. (NASDAQ:KRNY) has announced that it will pay a dividend on the 22nd of November, with investors receiving $0.11 per share. The dividend yield will be 6.4% based on this payment which is still above the industry average.

Check out our latest analysis for Kearny Financial

Kearny Financial Not Expected To Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Kearny Financial has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Kearny Financial's payout ratio of 83% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 8.9% over the next year. And assuming the dividend continues along recent trends, we believe the future payout ratio could reach 108%, which could put the dividend under pressure if earnings don't start to improve.

Kearny Financial's Dividend Has Lacked Consistency

Kearny Financial has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was $0.08 in 2015, and the most recent fiscal year payment was $0.44. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. 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.

Kearny Financial Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Kearny Financial has grown earnings per share at 13% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Kearny Financial has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good income stock.