Fraser & Neave Holdings Bhd (KLSE:F&N) Is Due To Pay A Dividend Of MYR0.33

The board of Fraser & Neave Holdings Bhd (KLSE:F&N) has announced that it will pay a dividend on the 10th of February, with investors receiving MYR0.33 per share. The dividend yield is 2.5% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Fraser & Neave Holdings Bhd

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

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Fraser & Neave Holdings Bhd's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 27.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from MYR0.82 total annually to MYR0.60. This works out to be a decline of approximately 3.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 3.4% per annum over the last five years, which admittedly is a bit slow. Fraser & Neave Holdings Bhd is struggling to find viable investments, so it is returning more to shareholders. 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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Fraser & Neave Holdings Bhd that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection 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.