Fox's (NASDAQ:FOXA) Upcoming Dividend Will Be Larger Than Last Year's

Fox Corporation's (NASDAQ:FOXA) dividend will be increasing from last year's payment of the same period to $0.26 on 27th of September. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.

See our latest analysis for Fox

Fox's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Fox's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 50.5%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

Fox Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $0.46 in 2019 to the most recent total annual payment of $0.52. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Fox's EPS has declined at around 6.4% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Fox's Dividend

Overall, we always like to see the dividend being raised, but we don't think Fox will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Fox that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.