Frontier Transport Holdings' (JSE:FTH) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Frontier Transport Holdings Limited (JSE:FTH) has announced that the dividend on 20th of June will be increased to R0.32, which will be 23% higher than last year. This will take the dividend yield from 8.7% to 9.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Frontier Transport Holdings

Frontier Transport Holdings' Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Frontier Transport Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 2.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which is in the range that makes us comfortable with the sustainability of the dividend.

Frontier Transport Holdings Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2018, the dividend has gone from R0.28 to R0.46. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Frontier Transport Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Frontier Transport Holdings May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Frontier Transport Holdings has only grown its earnings per share at 2.7% per annum over the past five years. While growth may be thin on the ground, Frontier Transport Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Frontier Transport Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.