It looks like Thai Beverage Public Company Limited (SGX:Y92) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Thai Beverage's shares on or after the 6th of February, you won't be eligible to receive the dividend, when it is paid on the 28th of February.

The company's next dividend payment will be ฿0.45 per share, on the back of last year when the company paid a total of ฿0.60 to shareholders. Calculating the last year's worth of payments shows that Thai Beverage has a trailing yield of 4.3% on the current share price of S$0.525. 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 Thai Beverage can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Thai Beverage

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Thai Beverage is paying out an acceptable 55% of its profit, a common payout level among 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. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.

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.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Thai Beverage earnings per share are up 8.8% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Thai Beverage has delivered an average of 3.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Thai Beverage an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Thai Beverage paid out a bit over half of its earnings and free cash flow last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you're not too concerned about Thai Beverage's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 2 warning signs for Thai Beverage (of which 1 is a bit concerning!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.