Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Corby Spirit and Wine Limited (TSE:CSW.A) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. In other words, investors can purchase Corby Spirit and Wine's shares before the 11th of September in order to be eligible for the dividend, which will be paid on the 27th of September.

The company's next dividend payment will be CA$0.22 per share, and in the last 12 months, the company paid a total of CA$0.85 per share. Based on the last year's worth of payments, Corby Spirit and Wine stock has a trailing yield of around 6.4% on the current share price of CA$13.38. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Corby Spirit and Wine

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. Last year Corby Spirit and Wine paid out 101% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 85% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's good to see that while Corby Spirit and Wine's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Corby Spirit and Wine paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Corby Spirit and Wine's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Corby Spirit and Wine has delivered an average of 1.7% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Is Corby Spirit and Wine an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent times, which is, we suppose, better than seeing them shrink. Additionally, Corby Spirit and Wine is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. It's not that we think Corby Spirit and Wine is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Corby Spirit and Wine and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for Corby Spirit and Wine (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.