Medallion Financial Corp. (NASDAQ:MFIN) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase Medallion Financial's shares before the 15th of August to receive the dividend, which will be paid on the 30th of August.

The company's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Calculating the last year's worth of payments shows that Medallion Financial has a trailing yield of 5.1% on the current share price of US$7.90. 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 investigate whether Medallion Financial can afford its dividend, and if the dividend could grow.

View our latest analysis for Medallion Financial

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Medallion Financial is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Medallion Financial has grown its earnings rapidly, up 49% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Medallion Financial has seen its dividend decline 8.0% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.