Tyson Foods (NYSE:TSN) Is Paying Out A Dividend Of $0.49

Simply Wall St · 10/14 18:27

Tyson Foods, Inc. (NYSE:TSN) has announced that it will pay a dividend of $0.49 per share on the 13th of December. This means that the annual payment will be 3.3% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Tyson Foods

Tyson Foods' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Tyson Foods' Could Struggle to Maintain Dividend Payments In The Future

Tyson Foods' Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. While Tyson Foods is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Earnings per share is forecast to rise by 198.8% over the next year. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

historic-dividend
NYSE:TSN Historic Dividend October 14th 2024

Tyson Foods Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.30, compared to the most recent full-year payment of $1.96. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Tyson Foods' earnings per share has shrunk at 22% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

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. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Tyson Foods is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Tyson Foods (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Tyson Foods not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.