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 from last year's comparable payment on the 10th of February to SGD0.03. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

View our latest analysis for Frasers Property

Frasers Property's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Frasers Property's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 68.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 33%, 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 annual payment during the last 9 years was SGD0.048 in 2013, and the most recent fiscal year payment was SGD0.03. This works out to be a decline of approximately 5.1% per year 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Although it's important to note that Frasers Property's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Frasers Property could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Frasers Property's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Frasers Property (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.