Steelcase Inc. (NYSE:SCS) stock is about to trade ex-dividend in 4 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Steelcase's shares before the 2nd of July to receive the dividend, which will be paid on the 20th of July.

The company's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.58 per share. Based on the last year's worth of payments, Steelcase stock has a trailing yield of around 3.8% on the current share price of $15.09. 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! As a result, readers should always check whether Steelcase has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Steelcase

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Steelcase distributed an unsustainably high 180% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Steelcase generated enough free cash flow to afford its dividend. It paid out 107% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

As Steelcase's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Steelcase's earnings per share have plummeted approximately 31% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Steelcase has lifted its dividend by approximately 14% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Steelcase is already paying out 180% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.