NYSE:QSR) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 17th of September will not receive this dividend, which will be paid on the 2nd of October.” data-reactid=”28″>It looks like Restaurant Brands International Inc. (NYSE:QSR) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 17th of September will not receive this dividend, which will be paid on the 2nd of October.
Restaurant Brands International’s next dividend payment will be US$0.52 per share, on the back of last year when the company paid a total of US$2.08 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 $54.51. 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 Restaurant Brands International ” data-reactid=”30″> 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. Last year Restaurant Brands International paid out 96% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 106% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings – expenses don’t pay themselves – so it’s not great to see it paying out so much of its cash flow.
Cash is slightly more important than profit from a dividend perspective, but given Restaurant Brands International’s payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.
here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″>Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It’s encouraging to see Restaurant Brands International has grown its earnings rapidly, up 35% a year for the past five years. Earnings per share have been growing rapidly, but the company is paying out an uncomfortably high percentage of its earnings as dividends. Fast-growing businesses normally need to reinvest most of their earnings in order to maintain growth, so we’d suspect that either earnings growth will slow or the dividend may not be increased for a while.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Restaurant Brands International has lifted its dividend by approximately 34% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Restaurant Brands International worth buying for its dividend? Earnings per share have been growing, despite the company paying out a concerningly high percentage of its earnings and cashflow. We struggle to see how a company paying out so much of its earnings and cash flow will be able to sustain its dividend in a downturn, or reinvest enough into its business to continue growing earnings without borrowing heavily. With the way things are shaping up from a dividend perspective, we’d be inclined to steer clear of Restaurant Brands International.