Read This Before Considering The Coca-Cola Company (NYSE:KO) For Its Upcoming US$0.46 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Coca-Cola Company (NYSE:KO) is about to trade ex-dividend in the next 4 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Coca-Cola's shares before the 30th of November in order to receive the dividend, which the company will pay on the 15th of December.

The company's next dividend payment will be US$0.46 per share. Last year, in total, the company distributed US$1.84 to shareholders. Last year's total dividend payments show that Coca-Cola has a trailing yield of 3.1% on the current share price of $58.57. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Coca-Cola

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Coca-Cola is paying out an acceptable 73% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 77% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Coca-Cola has grown its earnings rapidly, up 54% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Coca-Cola has delivered 5.1% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Coca-Cola is keeping back more of its profits to grow the business.

To Sum It Up

Has Coca-Cola got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Coca-Cola's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 73% and 77% respectively. To summarise, Coca-Cola looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Coca-Cola is facing. Every company has risks, and we've spotted 1 warning sign for Coca-Cola you should know about.

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.