Yahoo Finance Tiger Brands (JSE:TBS) Has Announced That It Will Be Increasing Its Dividend To ZAR6.71
Tiger Brands Limited (JSE:TBS) will increase its dividend from last year's comparable payment on the 22nd of January to ZAR6.71. This takes the annual payment to 4.9% of the current stock price, which is about average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Tiger Brands' stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Tiger Brands
Tiger Brands' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. The last payment was quite easily covered by earnings, but it made up 215% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS is forecast to expand by 20.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ZAR8.65 in 2013 to the most recent total annual payment of ZAR9.91. This works out to be a compound annual growth rate (CAGR) of approximately 1.4% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
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, Tiger Brands has only grown its earnings per share at 2.4% per annum over the past five years. Tiger Brands is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Tiger Brands' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Tiger Brands' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Tiger Brands that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
