Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Larsen & Toubro Infotech Limited (NSE:LTI) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 24th of October, you won't be eligible to receive this dividend, when it is paid on the 15th of November.

Larsen & Toubro Infotech's next dividend payment will be ₹12.5 per share. Last year, in total, the company distributed ₹28.0 to shareholders. Calculating the last year's worth of payments shows that Larsen & Toubro Infotech has a trailing yield of 1.7% on the current share price of ₹1610.6. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Larsen & Toubro Infotech

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. Larsen & Toubro Infotech paid out a comfortable 33% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Larsen & Toubro Infotech's earnings per share have been growing at 16% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.