Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gujarat Pipavav Port Limited (NSE:GPPL) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 30th of July to receive the dividend, which will be paid on the 7th of September.

Gujarat Pipavav Port's next dividend payment will be ₹1.80 per share, and in the last 12 months, the company paid a total of ₹3.60 per share. Looking at the last 12 months of distributions, Gujarat Pipavav Port has a trailing yield of approximately 4.5% on its current stock price of ₹79.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Gujarat Pipavav Port has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Gujarat Pipavav Port

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. Gujarat Pipavav Port paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (61%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Gujarat Pipavav Port's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not encouraging to see that Gujarat Pipavav Port's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 3 years ago, Gujarat Pipavav Port has lifted its dividend by approximately 24% a year on average.

Final Takeaway

Is Gujarat Pipavav Port worth buying for its dividend? Gujarat Pipavav Port has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear unsustainable. To summarise, Gujarat Pipavav Port looks okay on this analysis, although it doesn't appear a stand-out opportunity.

Ever wonder what the future holds for Gujarat Pipavav Port? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.