Last update on 2024-06-27

BankFinancial (BFIN) - Dividend Analysis (Final Score: 6/8)

Evaluate BankFinancial's (BFIN) dividend stability and performance with an insightful 8-criteria scoring system; BFIN achieves a score of 6/8. Learn more.

Short Analysis - Dividend Score: 6

We're running BankFinancial (BFIN) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for BankFinancial (BFIN) rates the company's dividend policy with a score of 6 based on 8 criteria. BFIN's dividend yield is higher than the industry average, which is good for income-seeking investors, but its sustainability needs more scrutiny. The 20-year average annual growth rate is impressive at 14.75%, though volatile. Its average annual payout ratio is below target, with past periods of severe instability and inconsistency. Dividend coverage by earnings and cash flow show fluctuations, indicating potential financial strain. Since 2013, BFIN's dividends have stabilized, though early years were turbulent. BFIN hasn't achieved over 25 years of dividends but shows a solid 17-year record. Finally, it has actively engaged in stock repurchases, reducing share count dramatically, which is generally positive for shareholder value.

Insights for Value Investors Seeking Stable Income

Given BFIN's strong dividend yield and impressive long-term growth rate, it presents a potentially attractive investment opportunity for dividend-focused investors. However, the historical volatility in payout ratios and dividend coverage flag some risks. The improvement in stability over the past decade and active stock repurchases add to its appeal, though vigilance is necessary regarding past financial strains. It's advisable to conduct a deeper analysis of recent financials and market conditions before making an investment decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Explain the criterion for BankFinancial (BFIN) and why it is important to consider

The current dividend yield of 3.8986% for BankFinancial (BFIN) is significantly higher than the industry average of 2.76%. Historically, BFIN's dividend yield has shown substantial variation, but it has consistently increased in the past few years from 2.4749% in 2018 to the current 3.8986%. This higher dividend yield could signal an attractive income opportunity for investors, especially given that it often outpaces the industry average, which has remained more stable. Given the stock's closing prices in the last 20 years, which have fluctuated with economic conditions, the consistent improvement in dividend yields indicates prudence in dividend policy despite market volatility. However, investors should assess whether these yields are sustainable by evaluating payout ratios and earnings consistency.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate indicates how much a company's dividend payouts have increased over a specific period. A growth rate higher than 5% is typically considered good as it demonstrates the company's ability to generate increased profits and return value to shareholders.

Looking at BankFinancial's dividend growth rate over the past 20 years, we observe several fluctuations. Specifically, the average growth rate amounts to approximately 14.75%, which is above the targeted 5% threshold. Despite some years with negative growth, such as -21.43% in 2011 and -86.36% in 2012, the company achieved multiple years with significant increases. For instance, there was a 100% increase in 2014 and a 150% rise in 2015. While the higher averages reflect positively on long-term growth, the notable volatility suggests potential underlying challenges. This pattern can be seen as both an opportunity for high returns and a risk factor due to less predictability in dividend payments. Therefore, while the trend meets the specified criterion, investors should also be cautious of its fluctuating nature.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio reflects a company's earnings stability and dividend sustainability over time by indicating the percentage of profits paid to shareholders as dividends.

Analyzing the payout ratio trends for BankFinancial (BFIN), it's evident that the average payout ratio over the last 20 years is -15.76%, which is substantially below the 65% threshold. This indicate either an unusually volatile earnings or payout policies. Several years show negative payout ratios, such as 2009 (-746.67%) and 2010 (-127.85%), which suggest periods of losses where dividends were paid despite these losses. High positive ratios above 65%, like in 2007 (80.85%) and 2021 (75.74%), reflect periods where substantial portions of profits were distributed to shareholders. Such trends highlight potential issues in earnings stability and dividend policy consistency, suggesting room for improvement.

Dividends Well Covered by Earnings?

This criterion evaluates whether the company’s earnings are sufficient to cover dividend payments. It indicates financial sustainability.

Examining BankFinancial's EPS and DPS from 2003 to 2023, a pattern emerges that raises red flags. Years like 2006, 2007, 2017, and 2018 show healthy coverage ratios (above 0.5), indicating sufficient earnings to pay dividends. Conversely, years such as 2009 (-7.47) and 2011 (-0.09) illustrate alarming shortages, pointing to potential financial strain. Despite recovering ratios post-2013, consistent negative coverage in earlier periods hampers overall financial stability. The pattern signifies fluctuating reliability, impacting investor confidence.

Dividends Well Covered by Cash Flow?

This criterion examines the extent to which a company's free cash flow covers its dividend payouts. It is important because a higher ratio indicates that the company generates enough cash to sustain or grow its dividends without leveraging debt or relying on external financing.

Examining BankFinancial's free cash flow against its dividend payouts from 2003 to 2023, the data reveals crucial insights into the company's dividend sustainability. A healthy dividend coverage ratio is typically over 1.0, indicating that the dividends are fully covered by free cash flow. The ratio exceeds 1.0 only in 2021 (1.034), suggesting that free cash flow sufficiently covered dividends that year. In 2020 (0.52) and 2022 (0.71), the coverage ratio shows moderate improvement, yet remains below the ideal threshold. The immediate years preceding 2020 show a worrying trend where the coverage is meager—indicating a risk of unsustainable dividends. Particularly concerning are the years from 2012 to 2015 with ratios well below 0.3, highlighting potential liquidity constraints or over-dividending risks. Comparatively, the earlier years like 2004 to 2011 display an inconsistency with very low coverage ratios, delineating suboptimal performance for dividend sustainability. BankFinancial seems to have improved its position post-2015, but its historical hiccups necessitate vigilance from potential investors.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over an extended period is essential because it reflects a company's ability to generate sufficient cash flows consistently. Investors seeking reliable income rely on stable dividends, making it a critical indicator of financial health and investor confidence.

The data shows that BankFinancial (BFIN) initiated its dividend payments in 2006. Since then, the dividends have shown periods of fluctuations, particularly between 2009 and 2012. However, from 2013 onwards, BFIN's dividend per share reflects a stabilizing trend, and since 2018, it has maintained a constant dividend of $0.40 per share. Although there were significant drops during the earlier years, no drastic drop of over 20% occurred post-2012, indicating better stability. Considering these recent trends and stability in the last decade, this indicates a positive shift but also highlights a turbulent start. Generally, for income-seeking investors, while the initial instability might raise concerns, the dividend consistency over the past decade is a positive sign.

Dividends Paid for Over 25 Years?

This examines whether BankFinancial (BFIN) has consistently paid dividends for over 25 years.

BankFinancial, Inc. (BFIN) has a dividend history dating back to 2006 when it initiated its first dividend payment of $0.18 per share. Since then, BFIN has consistently paid annual dividends, though there have been fluctuations in the dividend amounts. The company has maintained or increased its dividends for almost every year from 2006 onward, with only minor reductions during financial downturns, such as in 2011 and 2012. However, as BFIN started paying dividends in 2006, it falls short of meeting the criterion of having paid dividends for over 25 years. This track record indicates approximately 17 years of consistent dividends, which, while commendable, does not satisfy the criterion of over 25 years of dividend payments. Therefore, this trend is neutral but shows positive dividend behavior under 25-year benchmarks.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluating reliable stock repurchases over a 20-year period helps in assessing the company's commitment to returning value to shareholders, indicating financial health.

BankFinancial (BFIN) has shown a consistent pattern of repurchasing shares over the past 20 years, with 14 out of the 20 years recording substantial buybacks. The trend, punctuated by a reduction in share count from 24,462,250 in 2003 to a dramatic 0 in 2023, reflects an average repurchase rate of -8.023% annually. This is generally a positive trend, as it indicates the company's strategic move to enhance shareholder value by reducing outstanding shares and potentially increasing EPS (Earnings Per Share). Such buyback strategies can be seen as a sign of financial robustness and a pro-shareholder management ethos. Nonetheless, potential investors must consider the reasons for the drastic reduction to zero shares in 2023—whether it reflects a strategic shift, market conditions, or an error in data reporting.