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 Cleanaway Waste Management Limited (ASX:CWY) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Cleanaway Waste Management's shares before the 28th of February to receive the dividend, which will be paid on the 6th of April.

The company's next dividend payment will be AU$0.025 per share, on the back of last year when the company paid a total of AU$0.049 to shareholders. Looking at the last 12 months of distributions, Cleanaway Waste Management has a trailing yield of approximately 1.7% on its current stock price of A$2.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Cleanaway Waste Management has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Cleanaway Waste Management

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. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. 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. Fortunately, it paid out only 47% of its free cash flow in the past year.

It's positive to see that Cleanaway Waste Management'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 with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Cleanaway Waste Management's earnings per share have been growing at 15% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.