Suntory Beverage & Food Limited (TSE:2587) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Suntory Beverage & Food Limited (TSE:2587) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Suntory Beverage & Food's shares before the 27th of June in order to receive the dividend, which the company will pay on the 6th of September.

The company's upcoming dividend is JP¥55.00 a share, following on from the last 12 months, when the company distributed a total of JP¥110 per share to shareholders. Based on the last year's worth of payments, Suntory Beverage & Food has a trailing yield of 1.9% on the current stock price of JP¥5677.00. 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.

See our latest analysis for Suntory Beverage & Food

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Suntory Beverage & Food paying out a modest 28% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 37% of its free cash flow in the past year.

It's positive to see that Suntory Beverage & Food'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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Suntory Beverage & Food earnings per share are up 2.0% per annum over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Suntory Beverage & Food has increased its dividend at approximately 7.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Suntory Beverage & Food an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Suntory Beverage & Food 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Suntory Beverage & Food is halfway there. Suntory Beverage & Food looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Suntory Beverage & Food? See what the 10 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com