Primo Brands Corporation's (NYSE:PRMB) dividend will be increasing from last year's payment of the same period to $0.10 on 24th of March. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

Check out our latest analysis for Primo Brands

Primo Brands' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Primo Brands' Could Struggle to Maintain Dividend Payments In The Future

Primo Brands' Future Dividends May Potentially Be At Risk

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While Primo Brands is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to expand by 179.1%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Primo Brands Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Company Could Face Some Challenges Growing The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Primo Brands has impressed us by growing EPS at 100% per year over the past three years. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Primo Brands will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Primo Brands that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.