Fraser and Neave (SGX:F99) Has Announced A Dividend Of SGD0.04

The board of Fraser and Neave, Limited (SGX:F99) has announced that it will pay a dividend of SGD0.04 per share on the 11th of February. The dividend yield is 3.7% based on this payment, which is a little bit low compared to the other companies in the industry.

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Fraser and Neave's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Fraser and Neave's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 1.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 58%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

View 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 2016, the annual payment back then was SGD0.05, compared to the most recent full-year payment of SGD0.055. Its dividends have grown at less than 1% per annum over this time frame. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Fraser and Neave May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. However, Fraser and Neave's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Fraser and Neave's Dividend

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. While Fraser and Neave is earning enough to cover the payments, the cash flows are lacking. 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. 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.