Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Anheuser-Busch InBev SA/NV (EBR:ABI) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 19th of November will not receive the dividend, which will be paid on the 21st of November.
Anheuser-Busch InBev's next dividend payment will be €0.56 per share, on the back of last year when the company paid a total of €1.96 to shareholders. Looking at the last 12 months of distributions, Anheuser-Busch InBev has a trailing yield of approximately 2.5% on its current stock price of €72.27. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Anheuser-Busch InBev is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Anheuser-Busch InBev's 11% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Anheuser-Busch InBev has delivered 18% dividend growth per year on average over the past ten years.
Is Anheuser-Busch InBev worth buying for its dividend? Earnings per share have fallen significantly, although at least Anheuser-Busch InBev paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. All things considered, we are not particularly enthused about Anheuser-Busch InBev from a dividend perspective.
Ever wonder what the future holds for Anheuser-Busch InBev? See what the 28 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.