Fraser and Neave (SGX:F99) Is Due To Pay A Dividend Of SGD0.015

Fraser and Neave, Limited (SGX:F99) has announced that it will pay a dividend of SGD0.015 per share on the 6th of June. Including this payment, the dividend yield on the stock will be 4.4%, which is a modest boost for shareholders' returns.

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Fraser and Neave's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Fraser and Neave's dividend was only 54% of earnings, however it was paying out 227% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, EPS could fall by 0.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 53%, which is definitely feasible to continue.

Check out our latest analysis for Fraser and Neave

Fraser and Neave Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was SGD0.05, compared to the most recent full-year payment of SGD0.055. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. However, Fraser and Neave's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Fraser and Neave's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Fraser and Neave that investors need to be conscious of moving forward. Is Fraser and Neave not quite the opportunity you were looking for? Why not check out our selection of top 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.