Restaurant Brands International's (NYSE:QSR) Upcoming Dividend Will Be Larger Than Last Year's

Restaurant Brands International Inc. (NYSE:QSR) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of April to $0.58. This makes the dividend yield 2.8%, which is above the industry average.

See our latest analysis for Restaurant Brands International

Restaurant Brands International's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Restaurant Brands International was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 41.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Restaurant Brands International Is Still Building Its Track Record

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. Since 2015, the dividend has gone from $0.36 total annually to $2.32. This means that it has been growing its distributions at 23% per annum 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.

Restaurant Brands International Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Restaurant Brands International has impressed us by growing EPS at 9.1% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Restaurant Brands International's payments are rock solid. While Restaurant Brands International is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Restaurant Brands International is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Restaurant Brands International (1 makes us a bit uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.