Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Molson Coors Beverage Company (NYSE:TAP) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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 Molson Coors Beverage's shares on or after the 6th of December, you won't be eligible to receive the dividend, when it is paid on the 20th of December.

The company's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.76 per share. Calculating the last year's worth of payments shows that Molson Coors Beverage has a trailing yield of 2.8% on the current share price of US$62.06. If you buy this business for its dividend, you should have an idea of whether Molson Coors Beverage's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. Molson Coors Beverage paid out a comfortable 39% of its profit last year. 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 distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Molson Coors Beverage's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Molson Coors Beverage's earnings are down 2.5% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Molson Coors Beverage has increased its dividend at approximately 1.7% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Molson Coors Beverage? Molson Coors Beverage has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Molson Coors Beverage for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Molson Coors Beverage you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.