Why You Might Be Interested In Restaurant Brands International Limited Partnership (TSE:QSP.UN) For Its Upcoming Dividend
Readers hoping to buy Restaurant Brands International Limited Partnership (TSE:QSP.UN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Restaurant Brands International Limited Partnership's shares on or after the 20th of March, you won't be eligible to receive the dividend, when it is paid on the 4th of April.
The company's next dividend payment will be US$0.58 per share, on the back of last year when the company paid a total of US$2.32 to shareholders. Based on the last year's worth of payments, Restaurant Brands International Limited Partnership has a trailing yield of 2.9% on the current stock price of CA$107.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Restaurant Brands International Limited Partnership has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Restaurant Brands International Limited Partnership
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Restaurant Brands International Limited Partnership paying out a modest 44% of its earnings. 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. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Restaurant Brands International Limited Partnership's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Restaurant Brands International Limited Partnership paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Restaurant Brands International Limited Partnership's earnings per share have risen 13% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.
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 23% per year annual increase in its dividend, based on the past nine years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Has Restaurant Brands International Limited Partnership got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Restaurant Brands International Limited Partnership for the dividends alone, you should always be mindful of the risks involved. For example, Restaurant Brands International Limited Partnership has 3 warning signs (and 2 which are concerning) we think you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
