Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hill-Rom Holdings, Inc. (NYSE:HRC) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 19th of March will not receive the dividend, which will be paid on the 31st of March.

Hill-Rom Holdings's next dividend payment will be US$0.24 per share. Last year, in total, the company distributed US$0.88 to shareholders. Calculating the last year's worth of payments shows that Hill-Rom Holdings has a trailing yield of 0.9% on the current share price of $108.48. 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.

View our latest analysis for Hill-Rom Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hill-Rom Holdings paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Hill-Rom Holdings generated enough free cash flow to afford its dividend. The good news is it paid out just 15% of its free cash flow in the 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 Hill-Rom Holdings has grown its earnings rapidly, up 34% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Hill-Rom Holdings looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Hill-Rom Holdings has increased its dividend at approximately 8.9% 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.