Yahoo Finance Frontline plc (NYSE:FRO) Pays A US$1.07 Dividend In Just Four Days
Readers hoping to buy Frontline plc (NYSE:FRO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Frontline's shares on or after the 15th of March will not receive the dividend, which will be paid on the 31st of March.
The company's next dividend payment will be US$1.07 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Based on the last year's worth of payments, Frontline stock has a trailing yield of around 6.7% on the current share price of $18.22. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Frontline can afford its dividend, and if the dividend could grow.
View our latest analysis for Frontline
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Frontline paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Frontline generated enough free cash flow to afford its dividend. Over the last year it paid out 63% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Frontline's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Frontline has grown its earnings rapidly, up 46% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Frontline could have strong prospects for future increases to the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, seven years ago, Frontline has lifted its dividend by approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Frontline is keeping back more of its profits to grow the business.
Final Takeaway
Is Frontline worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Frontline is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's hard to get excited about Frontline from a dividend perspective.
So while Frontline looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Frontline has 5 warning signs (and 2 which are potentially serious) we think you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
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