IRADIMED CORPORATION (NASDAQ:IRMD) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase IRADIMED's shares before the 15th of November to receive the dividend, which will be paid on the 25th of November.

The company's next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$1.08 to shareholders. Based on the last year's worth of payments, IRADIMED has a trailing yield of 1.9% on the current stock price of US$56.47. 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 IRADIMED

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. IRADIMED paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether IRADIMED generated enough free cash flow to afford its dividend. Dividends consumed 69% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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?

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see IRADIMED's earnings have been skyrocketing, up 20% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last two years, IRADIMED has lifted its dividend by approximately 1.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because IRADIMED is keeping back more of its profits to grow the business.