Frasers Property's (SGX:TQ5) Shareholders Will Receive A Bigger Dividend Than Last Year

Frasers Property Limited (SGX:TQ5) has announced that it will be increasing its dividend on the 14th of February to S$0.02, which will be 33% higher than last year. Despite this raise, the dividend yield of 1.8% is only a modest boost to shareholder returns.

See our latest analysis for Frasers Property

Frasers Property's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Frasers Property was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 73.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 32%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Frasers Property's Dividend Has Lacked Consistency

It's comforting to see that Frasers Property has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The first annual payment during the last 8 years was S$0.048 in 2013, and the most recent fiscal year payment was S$0.02. This works out to a decline of approximately 58% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Frasers Property May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. However, Frasers Property's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Frasers Property is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

The company has also been raising capital by issuing stock equal to 34% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Frasers Property's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Frasers Property (of which 2 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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