Just four days before Molson Coors Beverage Company (NYSE:TAP) negotiates an ex-dividend

Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Molson Coors Beverage Company (NYSE:TAP) is set to go ex-dividend in just 4 days. The ex-dividend date is one business day before a company’s record date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any stock transaction must have settled before the record date to be eligible for a dividend. That means you’ll need to buy Molson Coors Beverage shares by June 2 to receive the dividend, which will be paid on June 15.

The company’s next dividend payment will be $0.38 per share, and over the past 12 months the company has paid a total of $1.52 per share. Last year’s total dividend payouts show that Molson Coors Beverage has a 2.8% yield on the current stock price of $55.15. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. That’s why we always have to check if the dividend payouts seem sustainable and if the business is growing.

Check out our latest analysis for Molson Coors Beverage

Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Molson Coors Beverage only paid out 21% of its earnings last year, which we believe is relatively low and leaves plenty of room for unforeseen circumstances. A useful secondary check may be to assess whether Molson Coors Beverage has generated enough free cash flow to pay its dividend. The good news is that it has only paid out 23% of its free cash flow over the past year.

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

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

historical-dividend

Have earnings and dividends increased?

When earnings decline, dividend companies become much more difficult to analyze and to own safely. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. Readers will then understand why we are concerned that Molson Coors Beverage’s earnings per share have fallen 8.0% annually over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid out shrinks.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Molson Coors Beverage has achieved an average annual dividend increase of 1.7%, based on dividend payouts over the past 10 years.

Last takeaway

Should investors buy Molson Coors Beverage for the upcoming dividend? Earnings per share are down significantly, even though at least the company is paying out a low, conservative percentage of its earnings and cash flow. It’s certainly not great to see earnings drop, but at least there may be a buffer before the dividend has to be cut. In summary, although it has some positive characteristics, we are not inclined to rush to buy Molson Coors Beverage today.

In light of this, although Molson Coors Beverage has an attractive dividend, it is worth knowing the risks associated with this stock. Every business has risks, and we’ve spotted 2 warning signs for Molson Coors Beverage you should know.

If you are looking for strong dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

About Geraldine Higgins

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