Restaurant Brands International (NYSE:QSR) Has Announced That It Will Be Increasing Its Dividend To $0.55

Restaurant Brands International Inc. (NYSE:QSR) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of July to $0.55. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Restaurant Brands International

Restaurant Brands International's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite comfortably covered by Restaurant Brands International's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 80% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to rise by 14.1% over the next year. If the dividend continues on this path, the payout ratio could be 71% by next year, which we think can be pretty sustainable going forward.

Restaurant Brands International Doesn't Have A Long Payment History

It is great to see that Restaurant Brands International has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.36 in 2015 to the most recent total annual payment of $2.20. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately, Restaurant Brands International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Restaurant Brands International is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Restaurant Brands International has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Restaurant Brands International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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