How Does Fraser and Neave Limited (SGX:F99) Fare As A Dividend Stock?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Fraser and Neave Limited (SGX:F99) has paid a dividend to shareholders. It currently yields 2.4%. Let’s dig deeper into whether Fraser and Neave should have a place in your portfolio.
Check out our latest analysis for Fraser and Neave
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it paying an annual yield above 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Fraser and Neave pass our checks?
The company currently pays out 74% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 50%, leading to a dividend yield of around 2.7%. However, EPS should increase to SGD0.095, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from Fraser and Neave fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Fraser and Neave produces a yield of 2.4%, which is on the low-side for Food stocks.
Next Steps:
After digging a little deeper into Fraser and Neave’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three pertinent aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for F99’s future growth? Take a look at our free research report of analyst consensus for F99’s outlook.
Valuation: What is F99 worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether F99 is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
