Foley Wines (NZSE:FWL) Has Announced A Dividend Of NZ$0.0471

Foley Wines Limited's (NZSE:FWL) investors are due to receive a payment of NZ$0.0471 per share on 21st of October. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Foley Wines

Foley Wines' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Foley Wines was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 10.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

Foley Wines Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2015, the annual payment back then was NZ$0.02, compared to the most recent full-year payment of NZ$0.04. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Foley Wines has impressed us by growing EPS at 10% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Foley Wines' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Foley Wines' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Foley Wines that investors should know about before committing capital to this stock. Is Foley Wines not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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