Fraser & Neave Holdings Bhd (KLSE:F&N) Has Announced A Dividend Of RM0.33

Fraser & Neave Holdings Bhd (KLSE:F&N) has announced that it will pay a dividend of RM0.33 per share on the 9th of February. Based on this payment, the dividend yield on the company's stock will be 2.5%, which is an attractive boost to shareholder returns.

View our latest analysis for Fraser & Neave Holdings Bhd

Fraser & Neave Holdings Bhd's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Fraser & Neave Holdings Bhd was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 5.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from RM0.73 in 2012 to the most recent annual payment of RM0.60. Doing the maths, this is a decline of about 1.9% 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Fraser & Neave Holdings Bhd's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Fraser & Neave Holdings Bhd's Dividend

Overall, a consistent dividend is a good thing, and we think that Fraser & Neave Holdings Bhd has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 & Neave Holdings Bhd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.