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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Restaurant Brands International Inc. (NYSE:QSR) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Restaurant Brands International's shares before the 21st of March to receive the dividend, which will be paid on the 4th of April.
The company's upcoming dividend is US$0.62 a share, following on from the last 12 months, when the company distributed a total of US$2.48 per share to shareholders. Based on the last year's worth of payments, Restaurant Brands International stock has a trailing yield of around 3.8% on the current share price of US$66.06. 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 investigate whether Restaurant Brands International can afford its dividend, and if the dividend could grow.
View our latest analysis for Restaurant Brands International
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Restaurant Brands International paid out 72% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Restaurant Brands International generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (79%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Restaurant Brands International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Restaurant Brands International earnings per share are up 5.5% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.