Dana Incorporated (NYSE:DAN) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 4th of March, you won't be eligible to receive this dividend, when it is paid on the 26th of March.

Dana's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Based on the last year's worth of payments, Dana stock has a trailing yield of around 1.7% on the current share price of $23.81. If you buy this business for its dividend, you should have an idea of whether Dana's dividend is reliable and sustainable. As a result, readers should always check whether Dana has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Dana

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. Dana reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Dana didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 25% of its cash flow last year.

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 fall far enough, the company could be forced to cut its dividend. Dana reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, nine years ago, Dana has lifted its dividend by approximately 8.0% a year on average.

We update our analysis on Dana every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Has Dana got what it takes to maintain its dividend payments? It's hard to get used to Dana paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Dana is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Dana despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 4 warning signs for Dana (1 is significant) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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