Suntory Beverage & Food Limited (TSE:2587) announced that it will declare a dividend of 55.00 yen per share on March 28, bringing the dividend yield to 2.3%, in line with the industry average.

Check out our latest analysis for Suntory Beverage & Food

Suntory Beverage & Food’s dividend is well covered by earnings

We want the dividend to remain consistent over the long term, so it’s important to check whether it’s sustainable. Before this announcement, Suntory Beverage & Food easily earned enough to cover the dividend, meaning that the majority of the company’s earnings are being used to support its growth.

Next year, EPS is expected to grow by 6.6%. If the dividend follows recent trends, we estimate the payout ratio to be 36%, a range that makes us comfortable with the sustainability of the dividend.

Suntory Beverage & Food has a solid track record

Even over a long dividend history, the company’s payouts have been remarkably stable. The dividend has increased from an annual total of ¥53.00 in 2014 to the most recent annual total payout of ¥110.00. This represents a compound annual growth rate (CAGR) of approximately 7.6% per year over that period. Companies like this can be very valuable over the long term if the decent growth rate can be maintained.

The dividend has growth potential

Investors who have held shares in the company over the past few years will be pleased with the dividends they have received. It is encouraging to see that Suntory Beverage & Food has grown earnings per share at 5.2% per year over the past five years. EPS growth bodes well for the dividend, as does the low payout ratio the company currently reports.

Suntory Beverage & Food seems to be a great dividend stock

Overall, we think this could be an attractive dividend stock, and it will get even better by paying a higher dividend this year. Distributions are fairly easily covered by earnings, which are also converted to cash flow. Taking all these factors into account, we think this has solid potential as a dividend stock.

It’s important to note that companies with a consistent dividend policy generate more confidence among investors than those with an irregular one. However, there are other things investors need to consider when analyzing stock performance. Companies with growing earnings tend to be the best dividend stocks over the long term. See what the 8 analysts we track are forecasting for Suntory Beverage & Food for free with public analyst estimates for the company. If you are a dividend investor, you may also want to take a look at our curated list of high dividend stocks.

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