Brown-Forman (NYSE:BF.B) Has Re-Affirmed Its Dividend Of US$0.18
Brown-Forman Corporation (NYSE:BF.B) will pay a dividend of US$0.18 on the 1st of October. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.
Check out our latest analysis for Brown-Forman
Brown-Forman's Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Brown-Forman's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 7.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 44%, which is comfortable for the company to continue in the future.
Brown-Forman Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.34 in 2011, and the most recent fiscal year payment was US$0.72. This means that it has been growing its distributions at 7.7% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
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 Brown-Forman's EPS has declined at around 2.1% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
In Summary
Overall, we think Brown-Forman is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
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. For instance, we've picked out 1 warning sign for Brown-Forman that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
This article by Simply Wall St is general in nature. 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.
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