Tyson Foods (NYSE:TSN) Has Announced A Dividend Of $0.49

Tyson Foods, Inc.'s (NYSE:TSN) investors are due to receive a payment of $0.49 per share on 13th of December. This means that the annual payment will be 3.3% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Tyson Foods

Tyson Foods' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Tyson Foods' Could Struggle to Maintain Dividend Payments In The Future

Tyson Foods' Future Dividends May Potentially Be At Risk

We aren't too impressed by dividend yields unless they can be sustained over time. Tyson Foods is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS is forecast to expand by 198.8%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Tyson Foods Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.30 in 2014, and the most recent fiscal year payment was $1.96. This means that it has been growing its distributions at 21% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Tyson Foods' EPS has declined at around 22% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

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 company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for Tyson Foods (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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