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Premium Brands Holdings Corporation (TSE:PBH) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Premium Brands Holdings' shares on or after the 28th of September, you won't be eligible to receive the dividend, when it is paid on the 13th of October.
The company's next dividend payment will be CA$0.77 per share. Last year, in total, the company distributed CA$3.08 to shareholders. Last year's total dividend payments show that Premium Brands Holdings has a trailing yield of 3.2% on the current share price of CA$97.04. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Premium Brands Holdings has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Premium Brands Holdings
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. Premium Brands Holdings distributed an unsustainably high 115% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 363% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Premium Brands Holdings intends to continue funding this dividend, or if it could be forced to cut the payment.
Cash is slightly more important than profit from a dividend perspective, but given Premium Brands Holdings's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Premium Brands Holdings's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.