Fraser & Neave Holdings Bhd (KLSE:F&N) Looks Interesting, And It's About To Pay A Dividend

It looks like Fraser & Neave Holdings Bhd (KLSE:F&N) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Fraser & Neave Holdings Bhd's shares before the 15th of May in order to be eligible for the dividend, which will be paid on the 31st of May.

The company's next dividend payment will be RM00.30 per share. Last year, in total, the company distributed RM0.60 to shareholders. Based on the last year's worth of payments, Fraser & Neave Holdings Bhd stock has a trailing yield of around 1.8% on the current share price of RM032.58. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Fraser & Neave Holdings Bhd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Fraser & Neave Holdings Bhd's payout ratio is modest, at just 40% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Fraser & Neave Holdings Bhd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Fraser & Neave Holdings Bhd, with earnings per share up 8.2% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Fraser & Neave Holdings Bhd's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Is Fraser & Neave Holdings Bhd worth buying for its dividend? Earnings per share growth has been growing somewhat, and Fraser & Neave Holdings Bhd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Fraser & Neave Holdings Bhd is being conservative with its dividend payouts and could still perform reasonably over the long run. Fraser & Neave Holdings Bhd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Fraser & Neave Holdings Bhd? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.