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Fraser and Neave, Limited (SGX:F99) has announced that it will pay a dividend of SGD0.04 per share on the 14th of February. This payment means the dividend yield will be 4.0%, which is below the average for the industry.
See our latest analysis for Fraser and Neave
Fraser and Neave's Payment Could Potentially Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Fraser and Neave's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Unless the company can turn things around, EPS could fall by 0.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 50%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was SGD0.14, compared to the most recent full-year payment of SGD0.055. This works out to be a decline of approximately 8.9% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Fraser and Neave May Find It Hard To Grow The Dividend
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Fraser and Neave hasn't seen much change in its earnings per share over the last five years.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Fraser and Neave is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Fraser and Neave (1 is a bit concerning!) that you should be aware of before investing. Is Fraser and Neave not quite the opportunity you were looking for? Why not check out our selection of top 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.