Yahoo Finance Tate & Lyle's (LON:TATE) Shareholders Will Receive A Bigger Dividend Than Last Year
Tate & Lyle plc (LON:TATE) will increase its dividend on the 5th of January to UK£0.09, which is 2.3% higher than last year. This makes the dividend yield 4.6%, which is above the industry average.
See our latest analysis for Tate & Lyle
Tate & Lyle's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Tate & Lyle was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
Over the next year, EPS is forecast to fall by 15.9%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 79%, which is definitely on the higher side.
Tate & Lyle Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from UK£0.24 to UK£0.31. This works out to be a compound annual growth rate (CAGR) of approximately 2.7% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Tate & Lyle May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Tate & Lyle has only grown its earnings per share at 3.7% per annum over the past five years. Growth of 3.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.
Our Thoughts On Tate & Lyle's Dividend
Overall, we always like to see the dividend being raised, but we don't think Tate & Lyle will make a great income stock. While Tate & Lyle is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 3 warning signs for Tate & Lyle you should be aware of, and 1 of them makes us a bit uncomfortable. We have also put together a list of global stocks with a solid dividend.
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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