Income Investors Should Know That Fraser & Neave Holdings Bhd (KLSE:F&N) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Fraser & Neave Holdings Bhd (KLSE:F&N) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Fraser & Neave Holdings Bhd investors that purchase the stock on or after the 14th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be RM00.30 per share. Last year, in total, the company distributed RM0.63 to shareholders. Looking at the last 12 months of distributions, Fraser & Neave Holdings Bhd has a trailing yield of approximately 2.3% on its current stock price of RM027.10. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fraser & Neave Holdings Bhd paid out a comfortable 45% of its profit last year. A useful secondary check can be to evaluate whether Fraser & Neave Holdings Bhd generated enough free cash flow to afford its dividend. Over the past year it paid out 117% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Fraser & Neave Holdings Bhd's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Fraser & Neave Holdings Bhd's ability to maintain its dividend.

See our latest analysis for Fraser & Neave Holdings Bhd

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Fraser & Neave Holdings Bhd, with earnings per share up 4.7% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Fraser & Neave Holdings Bhd has lifted its dividend by approximately 1.4% a year on average.

The Bottom Line

Should investors buy Fraser & Neave Holdings Bhd for the upcoming dividend? Fraser & Neave Holdings Bhd delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 117% of its cash flow over the last year, which is a mediocre outcome. In summary, while it has some positive characteristics, we're not inclined to race out and buy Fraser & Neave Holdings Bhd today.

If you want to look further into Fraser & Neave Holdings Bhd, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 1 warning sign with Fraser & Neave Holdings Bhd and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.