Suntory Beverage & Food Limited (TSE:2587) Passed Our Checks, And It's About To Pay A JP¥55.00 Dividend

Suntory Beverage & Food Limited (TSE:2587) stock is about to trade ex-dividend in three 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Suntory Beverage & Food's shares before the 27th of December in order to receive the dividend, which the company will pay on the 28th of March.

The company's next dividend payment will be JP¥55.00 per share, and in the last 12 months, the company paid a total of JP¥114 per share. Last year's total dividend payments show that Suntory Beverage & Food has a trailing yield of 2.3% on the current share price of JP¥5055.00. If you buy this business for its dividend, you should have an idea of whether Suntory Beverage & Food's dividend is reliable and sustainable. As a result, readers should always check whether Suntory Beverage & Food has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Suntory Beverage & Food

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 Suntory Beverage & Food paying out a modest 30% of its earnings. A useful secondary check can be to evaluate whether Suntory Beverage & Food generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.

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 4.3% per annum over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Suntory Beverage & Food has lifted its dividend by approximately 7.0% 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

Has Suntory Beverage & Food got what it takes to maintain its dividend payments? 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. It might be nice to see earnings growing faster, but Suntory Beverage & Food is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Suntory Beverage & Food, and we would prioritise taking a closer look at it.

Curious what other investors think of Suntory Beverage & Food? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.