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Important news for shareholders and potential investors in Anheuser-Busch InBev SA/NV (EBR:ABI): The dividend payment of US$0.56 per share will be distributed to shareholders on 29 November 2018, and the stock will begin trading ex-dividend at an earlier date, 27 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Anheuser-Busch InBev’s latest financial data to analyse its dividend attributes.
Check out our latest analysis for Anheuser-Busch InBev
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Does earnings amply cover its dividend payments?
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Will the company be able to keep paying dividend based on the future earnings growth?
How well does Anheuser-Busch InBev fit our criteria?
The current trailing twelve-month payout ratio for ABI is 96%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 47%, leading to a dividend yield of around 3.2%. In addition to this, EPS should increase to $4.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from Anheuser-Busch InBev fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, Anheuser-Busch InBev generates a yield of 2.6%, which is high for Beverage stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Anheuser-Busch InBev’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key factors you should further examine: