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Fraser and Neave, Limited's (SGX:F99) investors are due to receive a payment of SGD0.015 per share on 6th of June. Including this payment, the dividend yield on the stock will be 4.4%, which is a modest boost for shareholders' returns.
We've discovered 1 warning sign about Fraser and Neave. View them for free.
Fraser and Neave's Projected Earnings Seem Likely To Cover Future Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Fraser and Neave's dividend was only 54% of earnings, however it was paying out 227% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Looking forward, EPS could fall by 0.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 53%, which is definitely feasible to continue.
See our latest analysis for Fraser and Neave
Fraser and Neave Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was SGD0.05, compared to the most recent full-year payment of SGD0.055. Dividend payments have been growing, but very slowly over the period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Fraser and Neave's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Fraser and Neave that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.