Frasers Property's (SGX:TQ5) Upcoming Dividend Will Be Larger Than Last Year's

The board of Frasers Property Limited (SGX:TQ5) has announced that the dividend on 14th of February will be increased 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.

Check out our latest analysis for Frasers Property

Frasers Property's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Frasers Property's earnings easily 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 72.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is comfortable for the company to continue in the future.

Frasers Property's Dividend Has Lacked Consistency

Frasers Property has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from S$0.048 in 2014 to the most recent annual payment of S$0.02. Dividend payments have fallen sharply, down 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.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Unfortunately, Frasers Property's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, Frasers Property has the option to increase the payout ratio to return more cash to shareholders.

We'd also point out that Frasers Property has issued stock equal to 34% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

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 payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Frasers Property (of which 2 don't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.