Only Four Days Left To Cash In On Restaurant Brands International Limited Partnership's (TSE:QSP.UN) Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Restaurant Brands International Limited Partnership (TSE:QSP.UN) is about to trade ex-dividend in the next 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Restaurant Brands International Limited Partnership's shares before the 20th of December in order to be eligible for the dividend, which will be paid on the 4th of January.
The company's upcoming dividend is US$0.55 a share, following on from the last 12 months, when the company distributed a total of US$2.20 per share to shareholders. Looking at the last 12 months of distributions, Restaurant Brands International Limited Partnership has a trailing yield of approximately 2.9% on its current stock price of CA$100. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Restaurant Brands International Limited Partnership
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 Limited Partnership paid out 57% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (81%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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 consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Restaurant Brands International Limited Partnership, with earnings per share up 6.9% on average 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Restaurant Brands International Limited Partnership has delivered an average of 22% per year annual increase in its dividend, based on the past nine years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Restaurant Brands International Limited Partnership? Earnings per share have been growing modestly and Restaurant Brands International Limited Partnership paid out a bit over half of its earnings and free cash flow last year. To summarise, Restaurant Brands International Limited Partnership looks okay on this analysis, although it doesn't appear a stand-out opportunity.
However if you're still interested in Restaurant Brands International Limited Partnership as a potential investment, you should definitely consider some of the risks involved with Restaurant Brands International Limited Partnership. To that end, you should learn about the 3 warning signs we've spotted with Restaurant Brands International Limited Partnership (including 2 which are a bit unpleasant).
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
