Readers hoping to buy Morgan Stanley (NYSE:MS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Morgan Stanley's shares before the 28th of July in order to be eligible for the dividend, which will be paid on the 15th of August.

The company's next dividend payment will be US$0.78 per share, on the back of last year when the company paid a total of US$3.10 to shareholders. Calculating the last year's worth of payments shows that Morgan Stanley has a trailing yield of 3.8% on the current share price of $82.43. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Morgan Stanley

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Morgan Stanley's payout ratio is modest, at just 38% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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 Morgan Stanley has grown its earnings rapidly, up 21% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Morgan Stanley has increased its dividend at approximately 32% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.