JB Foods' (SGX:BEW) Dividend Is Being Reduced To S$0.002

JB Foods Limited (SGX:BEW) is reducing its dividend to S$0.002 on the 24th of September. However, the dividend yield of 2.9% still remains in a typical range for the industry.

Check out our latest analysis for JB Foods

JB Foods' Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. JB Foods is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 15.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

JB Foods' Dividend Has Lacked Consistency

It's comforting to see that JB Foods has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from US$0.053 in 2012 to the most recent annual payment of US$0.012. Dividend payments have fallen sharply, down 77% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see JB Foods has been growing its earnings per share at 16% a year over the past five years. JB Foods definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On JB Foods' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, JB Foods has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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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.
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