Yahoo Finance Constellation Brands, Inc. (NYSE:STZ) Is About To Go Ex-Dividend, And It Pays A 1.6% Yield
Constellation Brands, Inc. (NYSE:STZ) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 10th of February will not receive this dividend, which will be paid on the 25th of February.
Constellation Brands's next dividend payment will be US$0.75 per share. Last year, in total, the company distributed US$3.00 to shareholders. Based on the last year's worth of payments, Constellation Brands stock has a trailing yield of around 1.6% on the current share price of $192.89. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Constellation Brands has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Constellation Brands
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Constellation Brands is paying out an acceptable 69% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Constellation Brands generated enough free cash flow to afford its dividend. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.
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?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Constellation Brands's 16% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Constellation Brands has delivered an average of 19% per year annual increase in its dividend, based on the past five years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
Final Takeaway
Has Constellation Brands got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Wondering what the future holds for Constellation Brands? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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