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Constellation Brands, Inc. (NYSE:STZ) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Constellation Brands' shares before the 29th of April in order to be eligible for the dividend, which will be paid on the 15th of May.
The company's next dividend payment will be US$1.02 per share. Last year, in total, the company distributed US$4.08 to shareholders. Calculating the last year's worth of payments shows that Constellation Brands has a trailing yield of 2.2% on the current share price of US$187.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Constellation Brands has been able to grow its dividends, or if the dividend might be cut.
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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Constellation Brands paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Constellation Brands didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.
Check out our latest analysis for Constellation Brands
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Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Constellation Brands reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.