It looks like Molson Coors Brewing Company (NYSE:TAP) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 29th of August in order to be eligible for this dividend, which will be paid on the 13th of September.
Molson Coors Brewing's next dividend payment will be US$0.57 per share, and in the last 12 months, the company paid a total of US$2.28 per share. Based on the last year's worth of payments, Molson Coors Brewing stock has a trailing yield of around 4.6% on the current share price of $50.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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. Molson Coors Brewing paid out a comfortable 40% of its profit last year. 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. Fortunately, it paid out only 28% of its free cash flow in the past year.
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?
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Molson Coors Brewing, with earnings per share up 6.0% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Molson Coors Brewing has increased its dividend at approximately 11% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy Molson Coors Brewing for the upcoming dividend? Earnings per share have been growing moderately, and Molson Coors Brewing is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Molson Coors Brewing is being conservative with its dividend payouts and could still perform reasonably over the long run. Molson Coors Brewing looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Ever wonder what the future holds for Molson Coors Brewing? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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