Airtel Africa Plc (LON:AAF) stock is about to trade ex-dividend in 2 days. You can purchase shares before the 2nd of July in order to receive the dividend, which the company will pay on the 24th of July.

Airtel Africa's next dividend payment will be UK£0.03 per share, on the back of last year when the company paid a total of UK£0.06 to shareholders. Based on the last year's worth of payments, Airtel Africa stock has a trailing yield of around 8.0% on the current share price of £0.608. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Airtel Africa has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Airtel Africa

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Airtel Africa paid out 58% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Airtel Africa has grown its earnings rapidly, up 112% a year for the past three years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Airtel Africa could have strong prospects for future increases to the dividend.

We'd also point out that Airtel Africa issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.