Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see LCI Industries (NYSE:LCII) is about to trade ex-dividend in the next four 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase LCI Industries' shares on or after the 30th of August, you won't be eligible to receive the dividend, when it is paid on the 13th of September.

The company's next dividend payment will be US$1.05 per share. Last year, in total, the company distributed US$4.20 to shareholders. Based on the last year's worth of payments, LCI Industries has a trailing yield of 3.5% on the current stock price of US$120.12. 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 LCI Industries has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for LCI Industries

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 27% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see LCI Industries's earnings per share have been shrinking at 4.2% a year over the previous five years.