Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Siemens Healthineers AG (ETR:SHL) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Siemens Healthineers' shares on or after the 16th of February will not receive the dividend, which will be paid on the 20th of February.

The company's next dividend payment will be €0.95 per share, and in the last 12 months, the company paid a total of €0.95 per share. Based on the last year's worth of payments, Siemens Healthineers stock has a trailing yield of around 1.8% on the current share price of €51.78. If you buy this business for its dividend, you should have an idea of whether Siemens Healthineers's dividend is reliable and sustainable. As a result, readers should always check whether Siemens Healthineers has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Siemens Healthineers

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Siemens Healthineers is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Siemens Healthineers generated enough free cash flow to afford its dividend. The company paid out 94% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Siemens Healthineers paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Siemens Healthineers to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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. This is why it's a relief to see Siemens Healthineers earnings per share are up 5.2% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past four years, Siemens Healthineers has increased its dividend at approximately 7.9% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Siemens Healthineers got what it takes to maintain its dividend payments? Siemens Healthineers is paying out a reasonable percentage of its income and an uncomfortably high 94% of its cash flow as dividends. At least earnings per share have been growing steadily. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Siemens Healthineers. To that end, you should learn about the 2 warning signs we've spotted with Siemens Healthineers (including 1 which is potentially serious).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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