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It Might Not Be A Great Idea To Buy Molson Coors Beverage Company (NYSE:TAP) For Its Next Dividend

Readers hoping to buy Molson Coors Beverage Company (NYSE:TAP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 Molson Coors Beverage's shares before the 1st of June in order to receive the dividend, which the company will pay on the 15th of June.

The company's upcoming dividend is US$0.41 a share, following on from the last 12 months, when the company distributed a total of US$1.64 per share to shareholders. Based on the last year's worth of payments, Molson Coors Beverage has a trailing yield of 2.7% on the current stock price of $60.64. If you buy this business for its dividend, you should have an idea of whether Molson Coors Beverage's dividend is reliable and sustainable. So we need to investigate whether Molson Coors Beverage can afford its dividend, and if the dividend could grow.

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 earned then its dividend is usually at greater risk of being cut. Molson Coors Beverage's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Molson Coors Beverage didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 33% of its free cash flow in the past year.

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Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Molson Coors Beverage reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Molson Coors Beverage has delivered 2.5% dividend growth per year on average over the past 10 years.

Remember, you can always get a snapshot of Molson Coors Beverage's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Molson Coors Beverage an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that in mind though, if the poor dividend characteristics of Molson Coors Beverage don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 2 warning signs for Molson Coors Beverage you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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