Tate & Lyle (LON:TATE) Is Due To Pay A Dividend Of £0.129

Tate & Lyle plc's (LON:TATE) investors are due to receive a payment of £0.129 per share on 2nd of August. However, the dividend yield of 2.8% still remains in a typical range for the industry.

See our latest analysis for Tate & Lyle

Tate & Lyle's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Tate & Lyle was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 25.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was £0.306, compared to the most recent full-year payment of £0.191. The dividend has shrunk at around 4.6% 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Tate & Lyle's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Tate & Lyle's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Tate & Lyle is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Tate & Lyle is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Tate & Lyle that investors need to be conscious of moving forward. Is Tate & Lyle not quite the opportunity you were looking for? Why not check out our selection of top 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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