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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 means the annual payment will be 4.1% of the current stock price, which is lower than the industry average.
Check out our latest analysis for Fraser and Neave
Fraser and Neave's Projected Earnings Seem Likely To Cover Future Distributions
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 a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, EPS could fall by 0.3% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 51%, 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
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was SGD0.14, compared to the most recent full-year payment of SGD0.055. Doing the maths, this is a decline of about 8.9% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend's Growth Prospects Are Limited
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Unfortunately, Fraser and Neave's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fraser and Neave's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Fraser and Neave you should be aware of, and 1 of them is significant. 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.