Fraser & Neave Holdings Bhd (KLSE:F&N) Has Affirmed Its Dividend Of MYR0.30

Fraser & Neave Holdings Bhd's (KLSE:F&N) investors are due to receive a payment of MYR0.30 per share on 30th of May. The dividend yield is 2.3% based on this payment, which is a little bit low compared to the other companies in the industry.

We've discovered 1 warning sign about Fraser & Neave Holdings Bhd. View them for free.

Fraser & Neave Holdings Bhd'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 & Neave Holdings Bhd's dividend was only 45% of earnings, however it was paying out 117% 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, earnings per share is forecast to rise by 29.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Fraser & Neave Holdings Bhd

Fraser & Neave Holdings Bhd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was MYR0.62 in 2015, and the most recent fiscal year payment was MYR0.63. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 4.5% per year. Growth of 4.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Fraser & Neave Holdings Bhd's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fraser & Neave Holdings Bhd's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Fraser & Neave Holdings Bhd is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Fraser & Neave Holdings Bhd that investors should know about before committing capital to this stock. Is Fraser & Neave Holdings Bhd 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.