The Treasury Wine share price has tumbled 9% in 2022, so is the dividend yield worth its weight?

With the company’s latest interim dividend of 15 cents per share, investors may be wondering what’s next.

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Key points

  • Treasury Wine shares have moved in circles, which has been reflective of tough trading conditions
  • Management reported a decline in sales for H1 FY22 but remains positive on the long-term outlook
  • Goldman Sachs is expecting the Treasury Wine board to pay a final dividend of 16 cents, which represents a forecast dividend yield of 2.75%

The Treasury Wine Estates Ltd (ASX: TWE) share price has traded sideways over the past four months.

Investors quickly snapped up the winemaking and distribution giant’s shares following the company’s first-half results.

The strong bidding led Treasury Wine shares to accelerate from $10.54 on 15 February to $11.77 the following day.

Although this represents a gain of 11.6%, its shares have gradually retraced to $11.27 at Friday’s market close. This means that the company’s shares are now down 9% for 2022.

What did Treasury Wine last report?

Treasury Wine updated the ASX in mid-February with its financial scorecard for the six months ending 31 December.

The company reported mixed numbers across key financial metrics.

Namely, net sales revenue declined 10.1% to $1,267 million over the prior corresponding year. The weakened result reflected the impact of the United States commercial portfolio divestiture and the decline in shipments to mainland China.

On the bottom line, Treasury Wine recorded a fall of 7.5% in net profit after tax (NPAT) to $109.1 million.

While the decline in earnings was expected, investors chose to focus on the CEO’s comments on the company’s outlook.

Treasury Wine boss Mr Tim Ford said that trading conditions for the second half will be broadly consistent with H1 FY22.

However, looking further ahead, the company’s “financial objective remains to deliver sustainable top-line growth and high single-digit average earnings growth over the long-term.”

How much is Treasury Wine scheduled to pay in dividends?

With the company’s latest interim dividend of 15 cents per share paid last month, investors may be wondering what’s next.

Goldman Sachs is forecasting Treasury Wine to reward shareholders with a total FY22 dividend payment of 31 cents. This implies a final dividend payment of 16 cents per share for the second half.

When calculating against the current share price, Treasury Wine is trailing on a forecast fully-franked dividend yield of 2.75%. It is expected that the payout ratio will be at 65%, in line with the company’s guidance of 55% to 70%.

It’s worth remembering that the company has been a relatively consistent dividend payer over the years. Before the onset of COVID-19, the company had been paying shareholders fully-franked dividends of up to 20 cents on a biannual basis.

When looking at these numbers from above, the 2.75% dividend yield falls short of the Treasury Wine share price decline.

If the company’s shares can make a turnaround and reach the $12 mark – what it was trading at throughout the 12 months – then the dividend yield is worth its weight.

About the Treasury Wine share price

In 2022, the Treasury Wine share price has risen 10% in value, regardless of the short-term volatility.

Based on valuation grounds, Treasury Wine commands a market capitalisation of approximately $8.14 billion.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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