Short answer:
Based solely on the press‑release you shared, we can’t definitively judge whether the dividend payout ratio is sustainable. The announcement tells us the size of the quarterly dividend ($0.0615 per Class A share and $0.0535 per Class B share) and confirms that Andrew Peller Limited (ADW) has a long‑standing dividend‑paying history, but it does not provide the earnings, cash‑flow, or balance‑sheet data needed to calculate the current payout ratio and to assess its trend.
Below is a step‑by‑step framework you can use (and the key data points you’ll need) to evaluate the sustainability of ADW’s dividend given its recent earnings and cash‑flow performance.
1. Gather the necessary financial information
| Metric | Where to find it | Why it matters |
|---|---|---|
| Net income (or earnings) for the most recent quarter and FY | Quarterly/annual MD&A, earnings releases, 10‑Q/10‑K filings, or the company’s investor relations site | The dividend is typically funded out of earnings; the ratio of dividend to earnings shows how much of profit is being returned to shareholders. |
| Operating cash flow (OCF) for the same periods | Cash‑flow statement in the same filings | Cash, not earnings, is the real source of dividend payment. A healthy OCF relative to dividend outlays is a core sustainability indicator. |
| Free cash flow (FCF) = Operating cash flow – Capital expenditures | Cash‑flow statement | FCF shows the cash left after maintaining the business; a positive, growing FCF is a strong sign that dividends can be supported. |
| Total dividend paid (quarterly and year‑to‑date) | Dividend announcement, press releases, or the “Dividends” section of the MD&A | Needed to compute the payout ratio. |
| Shares outstanding (Class A & Class B) | Balance sheet or footnotes in the 10‑K/10‑Q | To translate total dividend cash outflow into a per‑share amount. |
| Debt levels & interest coverage | Balance sheet and income statement | High leverage can constrain cash available for dividends; interest coverage (EBIT/interest) shows how comfortably the firm can service debt. |
| Historical payout ratios | Past annual reports (usually a “Dividend policy” note) | Provides context – is the current ratio higher, lower, or consistent with the company’s long‑run practice? |
2. Calculate the Dividend Payout Ratio (the classic earnings‑based metric)
[
\text{Payout Ratio} = \frac{\text{Total Dividends Paid (cash)}}{\text{Net Income}}
]
- If the ratio is ≤ 50 % – the company is retaining at least half of its earnings, which is generally a comfortable cushion.
- If the ratio is > 70 % – the firm is returning most of its profit; sustainability becomes riskier, especially if earnings are volatile.
3. Calculate the Cash‑Flow Payout Ratio (a more robust measure)
[
\text{Cash‑Flow Payout Ratio} = \frac{\text{Total Dividends Paid}}{\text{Operating Cash Flow (or Free Cash Flow)}}
]
- OCF‑based ratio ≤ 60 % is usually considered safe for a mature, cash‑generating business.
- FCF‑based ratio is even stricter because it subtracts capex; a ratio under 50 % signals strong dividend sustainability.
4. Assess Trend & Volatility
| Question | What to look for |
|---|---|
| Earnings trend | Are net income and OCF growing, flat, or declining over the last 3–5 quarters? A declining trend would raise red flags. |
| Seasonality | ADW is a beverage‑alcohol producer; demand can be seasonal. Check whether Q2 earnings are historically weaker or stronger. |
| One‑off items | Adjust net income for non‑recurring gains/losses (e.g., asset sales, impairments) to get a “core earnings” view. |
| Cash‑flow quality | Compare OCF to net income. A large gap (e.g., high earnings but low OCF) can indicate earnings quality issues. |
5. Contextual clues from the press release
- Long dividend history – ADW has paid dividends every year since 1979, which suggests a culture of returning cash to shareholders and likely a disciplined payout policy.
- “Eligible dividends” – The company designates dividends as “eligible,” meaning they qualify for the lower tax rate for Canadian shareholders, which can make the dividend more attractive but does not affect sustainability directly.
- Quarterly payout size – $0.0615 (Class A) and $0.0535 (Class B) are modest in absolute terms. If ADW’s quarterly net income per share is, say, $0.30–$0.40, the payout ratio would be roughly 15–20 %, which is comfortably low. Conversely, if earnings per share are $0.07, the ratio would be > 80 %, which would be concerning.
Bottom line: The dividend size alone is not enough to gauge sustainability; you need to benchmark it against earnings and cash generation.
6. Practical next steps for you
- Pull the latest earnings release (likely posted on ADW’s investor‑relations page around early August 2025).
- Extract net income, operating cash flow, free cash flow, and total shares outstanding for Q2 2025 and the trailing twelve‑month (TTM) period.
- Compute the two payout ratios (earnings‑based and cash‑flow‑based).
- Compare these ratios to ADW’s historical averages (the past 3–5 years) and to peers in the Canadian alcoholic‑beverage sector (e.g., Labatt, Molson Coors, etc.).
- Check the balance sheet for any recent debt‑raising or capital‑expenditure programs that could erode cash‑flow available for dividends.
If the ratios are well within historical norms and cash‑flow coverage is solid, you can reasonably conclude that the dividend payout ratio is sustainable. If the ratios are significantly higher than historical levels or cash‑flow is weakening, the dividend may be at risk unless the board signals a policy change (e.g., a temporary reduction or a shift to a “special dividend”).
Example (illustrative numbers only)
| Item | Q2 2025 (hypothetical) |
|---|---|
| Net income (quarter) | $12.5 M |
| Operating cash flow (quarter) | $15.0 M |
| Free cash flow (quarter) | $13.0 M |
| Total dividend paid (quarter) | $4.0 M |
| Shares outstanding (weighted avg) | 200 M (Class A + Class B) |
- Earnings payout ratio = 4.0 M / 12.5 M = 32 % → comfortably low.
- OCF payout ratio = 4.0 M / 15.0 M = 27 % → strong cash‑flow coverage.
- FCF payout ratio = 4.0 M / 13.0 M = 31 % → also healthy.
In this hypothetical scenario, the dividend would be highly sustainable.
7. Bottom‑line answer (given the data you have)
From the information in the press release alone, we cannot definitively assess sustainability. The dividend is modest and the company’s long‑standing dividend policy is a positive sign, but a proper sustainability analysis requires recent net‑income, operating cash‑flow, free cash‑flow, and share‑count data. Once those figures are obtained, calculate both the earnings‑based and cash‑flow‑based payout ratios and compare them to historical levels and peer benchmarks. If the ratios are low‑to‑moderate and cash‑flow is stable or growing, the payout is likely sustainable; if they are high or cash‑flow is deteriorating, the dividend could be at risk.
Action: Retrieve ADW’s latest earnings and cash‑flow statements (Q2 2025 and the trailing twelve months) and run the calculations outlined above. That will give you a concrete, data‑driven answer to the sustainability question.