A.G. Barr (LON:BAG) Set to Go Ex-Dividend Amid Modest Yield and Sustainable Growth

Investors in A.G. Barr (LON:BAG), the iconic maker of Irn-Bru, have just four days to secure their shares ahead of the beverage giant’s upcoming ex-dividend date on May 8, 2025. With a total annual dividend yield of 2.8% for 2025—up from 2.5% in 2024—the company continues to balance shareholder returns with cautious growth. Yet beneath the surface, questions linger about the sustainability of its payout ratios and the sector’s competitive yield environment.

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The Ex-Dividend Deadline and Recent Dividend Trends

To qualify for the final dividend of £0.1376 per share—payable on June 6—investors must own the stock by May 7, 2025. This payment follows the interim dividend of £0.0310 per share, paid in November 2024, which marked a return to pre-pandemic dividend policies after a brief pause in 2020.

The company’s dividend growth has been steady but measured. In March 2025, it announced a 14.9% increase in the total annual dividend compared to 2024, driven by a final dividend hike to £0.1240 per share. Over the past decade, dividends have grown at an average annual rate of 4.3%, reflecting the firm’s focus on stability over aggressive expansion.

Dividend Sustainability: A Delicate Balance

A.G. Barr’s dividend appears sustainable at current levels, with a payout ratio of 47% of earnings and 59% of free cash flow—both below the redline of 70% that typically raises sustainability concerns. This financial discipline contrasts with some peers in the beverage sector, where higher payout ratios have strained cash reserves.

However, the company’s focus on dividends may limit reinvestment opportunities. With earnings per share growing at 6.1% annually over five years, the board faces a choice between rewarding shareholders and funding future growth initiatives. The 2021 dividend surge—100% higher than the prior year—highlighted this tension, as the payout briefly exceeded free cash flow, though it has since stabilized.

Risks and Considerations

While the trailing 12-month yield of 2.5% and the forward yield of 2.8% are positive for income-focused investors, they lag behind the sector average of 3.2%, according to Morningstar data. This gap underscores the importance of evaluating A.G. Barr’s broader fundamentals, including its reliance on seasonal demand for Irn-Bru and its ability to navigate rising input costs.

Additionally, the company’s dividend growth has been uneven. After suspending dividends in 2020 due to pandemic pressures, the 2021 rebound was abrupt, creating volatility. Investors should remain mindful of such swings, particularly as the UK’s beverage market faces rising competition from global brands.

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Conclusion: A Steady Hand in a Volatile Sector

For income investors, A.G. Barr presents a compelling but nuanced opportunity. The upcoming ex-dividend date on May 8 offers a clear entry point to lock in the 2025 dividend, which, at 2.8%, outpaces inflation and aligns with the company’s four-year dividend growth streak.

However, the modest yield and sector-relative lag suggest that this is not a high-yield play. Instead, A.G. Barr’s value lies in its consistent payout and defensive characteristics, particularly in a market where many consumer staples face margin pressures.

Crucially, the firm’s payout ratios—47% of earnings and 59% of free cash flow—leave room for modest growth without compromising dividends. Yet shareholders must weigh this against the risk of stagnant yields and the sector’s broader challenges.

In short, A.G. Barr remains a stable, if unexciting, choice for income seekers—provided investors are content with the trade-off between current returns and the potential for explosive growth elsewhere. For those acquiring shares before May 8, the dividend’s reliability is clear, but the path to outsized gains may require patience.