The board of Fraser and Neave, Limited (SGX:F99) has announced that it will pay a dividend on the 14th of February, with investors receiving SGD0.04 per share. The dividend yield is 4.1% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Fraser and Neave

Fraser and Neave's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by Fraser and Neave's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 0.3% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 51%, which is definitely feasible to continue.

SGX:F99 Historic Dividend January 14th 2025

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from SGD0.14 total annually to SGD0.055. The dividend has shrunk at around 8.9% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Unfortunately, Fraser and Neave's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fraser and Neave's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Fraser and Neave you should be aware of, and 1 of them is a bit unpleasant. Is Fraser and Neave not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.