Just 4 Days Before Fresh Del Monte Produce Inc. (NYSE:FDP) Will Be Trading Ex-Dividend

Fresh Del Monte Produce Inc. (NYSE:FDP) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 3rd of March to receive the dividend, which will be paid on the 27th of March.

Fresh Del Monte Produce's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Looking at the last 12 months of distributions, Fresh Del Monte Produce has a trailing yield of approximately 1.4% on its current stock price of $29. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Fresh Del Monte Produce has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Fresh Del Monte Produce

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fresh Del Monte Produce has a low and conservative payout ratio of just 17% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 14% of its free cash flow in the last year.

It's positive to see that Fresh Del Monte Produce's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Fresh Del Monte Produce paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Fresh Del Monte Produce's earnings per share have fallen at approximately 12% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fresh Del Monte Produce has delivered 8.0% dividend growth per year on average over the past nine years.

The Bottom Line

Has Fresh Del Monte Produce got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

Curious about whether Fresh Del Monte Produce has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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