Dairy Farm International Holdings Ltd (SGX: D01) is a pan-Asian retail group with more than 7,400 outlets (including associates and joint ventures) across many Asian countries and territories. It operates supermarkets, hypermarkets, convenience stores, health and beauty stores, and home furnishings stores under popular brands such as Cold Storage, 7-Eleven, Guardian and IKEA.
Dairy Farm is set to join the Straits Times Index (SGX: ^STI) in less than two weeks’ time due to a re-shuffle of the index. In this article, let’s learn more about Dairy Farm’s dividend such as its dividend yield, dividend history and most importantly, its dividend sustainability.
At the closing price of US$9.23 yesterday, Dairy Farm had a dividend yield of 2.28%. In contrast, the SPDR STI ETF (SGX: ES3) had a distribution yield of 3.56% on the same day. The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the fundamentals of Straits Times Index.
Dividend amount and payout periods
Dairy Farm dished out a total ordinary dividend of 21 US cents per share for its fiscal year ended 31 December 2017. The dividend is usually split into two parts – one part (interim dividend) is given out for the second quarter while the other (final dividend) for the fourth quarter.
In 2017, Dairy Farm paid out 6.5 cents as an interim dividend and 14.5 cents as a final dividend.
The following chart shows Dairy Farm’s dividend history on a per share basis from 2008 to 2017:Source: Dairy Farm investor relations website
The group increased its total dividends at 4.6% annually, from 14 US cents in 2008 to 21 US cents in 2017.
From 2014 to 2017, however, its total dividends had fallen overall, in line with the fall in earnings during the same period, as seen below:Source: Dairy Farm 2017 annual report
To find out if a company’s dividends are sustainable, we can compare its free cash flow to the amount in dividends that it pays out. Firm which pay less than 100% of their free cash flow as dividends leave some room for error and have space for dividend growth in the future.
The following shows Diary Farm’s free cash flow, total dividends paid, and dividend payout ratio (dividend as a percentage of net profit) since 2013:Source: S&P Global Market Intelligence (LTM = last twelve months)
Dairy Farm’s dividends look sustainable as the company pays out less than 100% of its earnings and free cash flow as dividends.
Dividend yield history
The following chart shows Dairy Farm’s dividend yield for the past 10 years, from September 2008 to September 2018:Source: S&P Global Market Intelligence
Dairy Farm’s average dividend yield for the past 10 years has been 2.45%. With the current dividend yield of 2.28%, its shares look slightly expensive.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Dairy Farm International Holdings Ltd. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.