Primo Brands Corporation (NYSE:PRMB) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Primo Brands' shares before the 7th of March in order to receive the dividend, which the company will pay on the 24th of March.

The upcoming dividend for Primo Brands is US$0.10 per share. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Primo Brands

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Primo Brands lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Primo Brands didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out an unsustainably high 223% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Primo Brands is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Primo Brands reported a loss last year, but at least the general trend suggests its income has been improving over the past three years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

This is Primo Brands's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

Remember, you can always get a snapshot of Primo Brands's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Primo Brands an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." It's not that we think Primo Brands is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Primo Brands despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 1 warning sign for Primo Brands and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking 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.