Readers hoping to buy Sabre Insurance Group plc (LON:SBRE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase Sabre Insurance Group's shares on or after the 22nd of August, you won't be eligible to receive the dividend, when it is paid on the 25th of September.

The company's upcoming dividend is UK￡0.017 a share, following on from the last 12 months, when the company distributed a total of UK￡0.051 per share to shareholders. Calculating the last year's worth of payments shows that Sabre Insurance Group has a trailing yield of 3.1% on the current share price of UK￡1.636. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Sabre Insurance Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Sabre Insurance Group is paying out an acceptable 50% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Sabre Insurance Group's earnings per share have fallen at approximately 9.9% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sabre Insurance Group has seen its dividend decline 16% per annum on average over the past six years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.