The board of BankFinancial Corporation (NASDAQ:BFIN) has announced that it will pay a dividend on the 29th of November, with investors receiving $0.10 per share. This payment means that the dividend yield will be 3.3%, which is around the industry average.

View our latest analysis for BankFinancial

BankFinancial's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, BankFinancial has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but BankFinancial's payout ratio of 63% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 14.3%. If the dividend continues along recent trends, we estimate the future payout ratio will be 62%, which is in the range that makes us comfortable with the sustainability of the dividend.

BankFinancial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.04 in 2014 to the most recent total annual payment of $0.40. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. BankFinancial has seen earnings per share falling at 8.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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.

Our Thoughts On BankFinancial's Dividend

Overall, we think BankFinancial is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in BankFinancial in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.