It looks like Thai Beverage Public Company Limited (SGX:Y92) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 7th of February to receive the dividend, which will be paid on the 28th of February.

Thai Beverage's next dividend payment will be S$0.33 per share. Last year, in total, the company distributed S$0.48 to shareholders. Based on the last year's worth of payments, Thai Beverage stock has a trailing yield of around 2.6% on the current share price of SGD0.795. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Thai Beverage

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Thai Beverage is paying out an acceptable 52% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Thai Beverage generated enough free cash flow to afford its dividend. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Thai Beverage's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, Thai Beverage has lifted its dividend by approximately 4.8% a year on average.

To Sum It Up

Has Thai Beverage got what it takes to maintain its dividend payments? It's unfortunate that earnings per share have not grown, and we'd note that Thai Beverage is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. In summary, while it has some positive characteristics, we're not inclined to race out and buy Thai Beverage today.

Wondering what the future holds for Thai Beverage? See what the 18 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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