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Restaurant Brands International Inc.'s (NYSE:QSR) dividend will be increasing from last year's payment of the same period to $0.62 on 4th of April. This makes the dividend yield 3.8%, which is above the industry average.
View our latest analysis for Restaurant Brands International
Restaurant Brands International's Payment Could Potentially Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Restaurant Brands International was paying out 72% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Over the next year, EPS is forecast to expand by 43.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.
Restaurant Brands International Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.36 in 2015 to the most recent total annual payment of $2.48. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Restaurant Brands International has grown earnings per share at 5.6% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.
Our Thoughts On Restaurant Brands International's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Restaurant Brands International is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Restaurant Brands International is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Restaurant Brands International (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.