ForFarmers (AMS:FFARM) Has Affirmed Its Dividend Of €0.29

The board of ForFarmers N.V. (AMS:FFARM) has announced that it will pay a dividend on the 28th of April, with investors receiving €0.29 per share. The dividend yield will be 8.2% based on this payment which is still above the industry average.

View our latest analysis for ForFarmers

ForFarmers Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 34.4%. If the dividend continues on its recent course, the payout ratio in 12 months could be 167%, which is a bit high and could start applying pressure to the balance sheet.

ForFarmers' Dividend Has Lacked Consistency

It's comforting to see that ForFarmers has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the first annual payment was €0.24, compared to the most recent full-year payment of €0.19. This works out to be a decline of approximately 4.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ForFarmers' EPS has fallen by approximately 23% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

ForFarmers' Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 ForFarmers that you should be aware of before investing. Is ForFarmers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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