Freightways Group (NZSE:FRW) Is Paying Out A Dividend Of NZ$0.2235

Freightways Group Limited (NZSE:FRW) has announced that it will pay a dividend of NZ$0.2235 per share on the 2nd of October. Based on this payment, the dividend yield on the company's stock will be 4.4%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Freightways Group

Freightways Group's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 86% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 36.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 73% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of NZ$0.19 in 2013 to the most recent total annual payment of NZ$0.37. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Freightways Group might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Freightways Group hasn't seen much change in its earnings per share over the last five years. Freightways Group's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Freightways Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Freightways Group's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Freightways Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated 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.