Readers hoping to buy Tristel plc (LON:TSTL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Tristel investors that purchase the stock on or after the 20th of March will not receive the dividend, which will be paid on the 11th of April.

The company's next dividend payment will be UK£0.0568 per share. Last year, in total, the company distributed UK£0.14 to shareholders. Based on the last year's worth of payments, Tristel has a trailing yield of 4.2% on the current stock price of UK£3.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Tristel has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Tristel

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Tristel paid out 108% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether Tristel generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (83%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's good to see that while Tristel's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Tristel earnings per share are up 7.1% per annum over the last five years.