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Why Dividend Hunters Love Britvic plc (LON:BVIC)

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Britvic plc (LON:BVIC) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 3.0% to shareholders, making it a relatively attractive dividend stock. Does Britvic tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.

View our latest analysis for Britvic

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • Is it the top 25% annual dividend yield payer?

  • Does it consistently pay out dividends without missing a payment of significantly cutting payout?

  • Has dividend per share amount increased over the past?

  • Can it afford to pay the current rate of dividends from its earnings?

  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

LSE:BVIC Historical Dividend Yield, April 4th 2019
LSE:BVIC Historical Dividend Yield, April 4th 2019

How does Britvic fare?

The current trailing twelve-month payout ratio for the stock is 64%, which means that the dividend is covered by earnings. However, going forward, analysts expect BVIC's payout to fall to 51% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.3%. However, EPS should increase to £0.51, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. In the case of BVIC it has increased its DPS from £0.13 to £0.28 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.

In terms of its peers, Britvic generates a yield of 3.0%, which is high for Beverage stocks but still below the market's top dividend payers.

Next Steps:

Taking into account the dividend metrics, Britvic ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. There are three relevant factors you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for BVIC’s future growth? Take a look at our free research report of analyst consensus for BVIC’s outlook.

  2. Valuation: What is BVIC worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BVIC is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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 editorial-team@simplywallst.com. 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.

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