Washington H. Soul Pattinson and Company Limited (ASX:SOL) stock is about to trade ex-dividend in 4 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. 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. In other words, investors can purchase Washington H. Soul Pattinson's shares before the 17th of November in order to be eligible for the dividend, which will be paid on the 12th of December.

The company's upcoming dividend is AU$0.51 a share, following on from the last 12 months, when the company distributed a total of AU$0.87 per share to shareholders. Last year's total dividend payments show that Washington H. Soul Pattinson has a trailing yield of 2.5% on the current share price of A$34.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Washington H. Soul Pattinson can afford its dividend, and if the dividend could grow.

See our latest analysis for Washington H. Soul Pattinson

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. Fortunately Washington H. Soul Pattinson's payout ratio is modest, at just 40% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

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. With that in mind, we're encouraged by the steady growth at Washington H. Soul Pattinson, with earnings per share up 8.8% on average over the last five years.



Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Washington H. Soul Pattinson has delivered an average of 6.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Washington H. Soul Pattinson for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Washington H. Soul Pattinson appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Ever wonder what the future holds for Washington H. Soul Pattinson? See what the two analysts we track are forecasting,  with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.