Readers hoping to buy Admiral Group plc (LON:ADM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 6th of May, you won't be eligible to receive this dividend, when it is paid on the 4th of June.

Admiral Group's next dividend payment will be UK£0.86 per share, on the back of last year when the company paid a total of UK£1.57 to shareholders. Based on the last year's worth of payments, Admiral Group has a trailing yield of 5.0% on the current stock price of £31.29. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Admiral Group

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. Admiral Group is paying out an acceptable 69% of its profit, a common payout level among most companies.

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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Admiral Group earnings per share are up 9.7% 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. Admiral Group has delivered an average of 9.4% 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.

Final Takeaway

Is Admiral Group worth buying for its dividend? Admiral Group has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.

If you're not too concerned about Admiral Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 3 warning signs for Admiral Group (of which 1 is a bit unpleasant!) you should know about.