Readers hoping to buy TMX Group Limited (TSE:X) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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 TMX Group's shares before the 15th of November in order to be eligible for the dividend, which will be paid on the 29th of November.

The company's upcoming dividend is CA$0.19 a share, following on from the last 12 months, when the company distributed a total of CA$0.76 per share to shareholders. Last year's total dividend payments show that TMX Group has a trailing yield of 1.7% on the current share price of CA$45.04. 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 TMX Group can afford its dividend, and if the dividend could grow.

View our latest analysis for TMX Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TMX Group paid out 50% of its earnings to investors last year, a normal payout level for most businesses.

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?

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see TMX Group earnings per share are up 7.3% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TMX Group has delivered an average of 9.0% 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.