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Molson Coors Brewing Company (NYSE:TAP) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 2.5%, and has a market cap of US$14.00b. Does Molson Coors Brewing tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Molson Coors Brewing
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it be able to continue to payout at the current rate in the future?
Does Molson Coors Brewing pass our checks?
Molson Coors Brewing has a trailing twelve-month payout ratio of 22.4%, which means that the dividend is covered by earnings. Going forward, analysts expect TAP’s payout to increase to 41.9% of its earnings, which leads to a dividend yield of 3.2%. However, EPS is forecasted to fall to $5.29 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of TAP it has increased its DPS from $0.80 to $1.64 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes TAP a true dividend rockstar.
In terms of its peers, Molson Coors Brewing generates a yield of 2.5%, which is on the low-side for Beverage stocks.
Next Steps:
With this in mind, I definitely rank Molson Coors Brewing as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key aspects you should look at: