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Only Three Days Left To Cash In On Britvic's (LON:BVIC) Dividend

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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Britvic plc (LON:BVIC) is about to go ex-dividend in just three 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Britvic's shares on or after the 16th of December, you won't be eligible to receive the dividend, when it is paid on the 2nd of February.

The company's upcoming dividend is UK£0.18 a share, following on from the last 12 months, when the company distributed a total of UK£0.24 per share to shareholders. Based on the last year's worth of payments, Britvic stock has a trailing yield of around 2.7% on the current share price of £9.065. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Britvic can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Britvic

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Britvic paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 47% of its free cash flow in the past year.

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.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Britvic's earnings per share have been shrinking at 2.4% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Britvic has lifted its dividend by approximately 3.8% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

The Bottom Line

Has Britvic 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. All things considered, we are not particularly enthused about Britvic from a dividend perspective.

So if you want to do more digging on Britvic, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 2 warning signs for Britvic that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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