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Restaurant Brands International's (NYSE:QSR) Shareholders Will Receive A Bigger Dividend Than Last Year

Restaurant Brands International Inc. (NYSE:QSR) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of July to $0.55. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

View our latest analysis for Restaurant Brands International

Restaurant Brands International's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Restaurant Brands International was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

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Over the next year, EPS is forecast to expand by 14.1%. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.

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historic-dividend

Restaurant Brands International Doesn't Have A Long Payment History

It is great to see that Restaurant Brands International has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 8 years was $0.36 in 2015, and the most recent fiscal year payment was $2.20. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Restaurant Brands International hasn't seen much change in its earnings per share over the last five years. Growth of 1.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Restaurant Brands International's Dividend

Overall, we always like to see the dividend being raised, but we don't think Restaurant Brands International will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Restaurant Brands International (1 is potentially serious!) that you should be aware of before investing. Is Restaurant Brands International not quite the opportunity you were looking for? Why not check out our selection of top 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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