Tyson Foods (NYSE:TSN) Is Due To Pay A Dividend Of $0.49

The board of Tyson Foods, Inc. (NYSE:TSN) has announced that it will pay a dividend of $0.49 per share on the 13th of December. Based on this payment, the dividend yield will be 3.2%, which is fairly typical for the industry.

View 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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Even though Tyson Foods isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Earnings per share is forecast to rise by 196.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Tyson Foods Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.30, compared to the most recent full-year payment of $1.96. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Tyson Foods' EPS has declined at around 22% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tyson Foods' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Tyson Foods (1 is concerning!) that you should be aware of before investing. Is Tyson Foods not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.