Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Stolt-Nielsen Limited (OB:SNI) is about to trade ex-dividend in the next 1 days. Investors can purchase shares before the 26th of November in order to be eligible for this dividend, which will be paid on the 11th of December.

Stolt-Nielsen's upcoming dividend is kr0.25 a share, following on from the last 12 months, when the company distributed a total of kr0.50 per share to shareholders. Calculating the last year's worth of payments shows that Stolt-Nielsen has a trailing yield of 4.1% on the current share price of NOK111.4. 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! As a result, readers should always check whether Stolt-Nielsen has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Stolt-Nielsen

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. Stolt-Nielsen distributed an unsustainably high 162% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Stolt-Nielsen generated enough free cash flow to afford its dividend. Luckily it paid out just 19% of its free cash flow last year.

It's good to see that while Stolt-Nielsen's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Stolt-Nielsen's earnings per share have dropped 26% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stolt-Nielsen's dividend payments per share have declined at 6.7% per year on average over the past ten years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.