Frasers Property (SGX:TQ5) Will Pay A Dividend Of SGD0.045

The board of Frasers Property Limited (SGX:TQ5) has announced that it will pay a dividend of SGD0.045 per share on the 14th of February. This means that the annual payment will be 4.8% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Frasers Property

Frasers Property's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 108% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 13%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, earnings per share is forecast to rise by 20.3% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 75% 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. Since 2015, the annual payment back then was SGD0.048, compared to the most recent full-year payment of SGD0.045. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Frasers Property's EPS has declined at around 24% a year. 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.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Frasers Property you should be aware of, and 1 of them doesn't sit too well with us. 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.