Frontier Transport Holdings Limited (JSE:FTH) The stock will trade ex-dividend in three days. The ex-dividend date is one business day before the record date, the record date on which shareholders must be recorded on the company’s books in order to be entitled to a dividend payment. The ex-dividend date is important because any transaction involving a stock must occur before the record date to be eligible for a dividend. This means you must purchase Frontier Transport Holdings shares before December 12th to receive the dividend, which will be paid on December 18th.
The company’s upcoming dividend is R0.24 per share, following the last 12 months in which the company paid out a total of R0.59 per share to shareholders. Based on the last year’s payments, Frontier Transport Holdings shares have a trailing yield of around 9.5% on the current share price of ZAR6.2. Dividends are an important source of income for many shareholders, but the health of the company is critical to maintaining those dividends. We need to see whether the dividend is covered by earnings and whether it is growing.
Check out our latest analysis for Frontier Transport Holdings
Dividends are usually paid from company earnings. So if a company pays out more than it earned, it’s usually at a higher risk of having its dividend cut. Frontier Transport Holdings paid out more than half (50%) of its profits last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Frontier Transport Holdings generated enough free cash flow to pay its dividend. Fortunately, only 34% of its free cash flow was paid out last year.
It’s positive to see that Frontier Transport Holdings’ 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 is cut.
Click here to see how much of its profit Frontier Transport Holdings paid out in the last 12 months.
Have profits and dividends increased?
Companies with consistently increasing earnings per share generally make the best dividend stocks because they tend to have an easier time growing dividends per share. If business goes into a downturn and the dividend is cut, the company’s value could fall dramatically. That’s why it’s a relief to see that Frontier Transport Holdings’ earnings per share have grown at 7.7% per year over the last five years. While profits have increased credibly, the company is distributing a large portion of its profits to shareholders. If management continues to raise the payout ratio, we would view this as a tacit signal that the company’s growth prospects are slowing.
Another important way to measure a company’s dividend prospects is by measuring its historical dividend growth rate. Over the past five years, Frontier Transport Holdings has increased its dividend by about 16% per year on average. It’s encouraging to see the company increasing the dividend as profits rise, suggesting there is at least some interest on the part of the company in rewarding shareholders.
Should investors buy Frontier Transport Holdings for its upcoming dividend? Earnings per share growth was modest, and Frontier Transport Holdings paid out more than half of its earnings and less than half of its free cash flow, although both payout ratios are within normal limits. While it has some good things going for it, we’re a bit ambivalent and it would take more to convince us of Frontier Transport Holdings’ dividend advantages.
With this in mind, a crucial part of thorough stock analysis is being aware of all the risks stocks currently face. For example – Frontier Transport Holdings has 3 warning signs We think you should be aware of this.
A common investing mistake is buying the first interesting stock you see. Here you can find a complete list of high-yield dividend stocks.
Do you have feedback on this article? Worried about the content? Get in touch directly with us. Alternatively, you can also send an email to editor-team (at) simplywallst.com.
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.