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Readers hoping to buy Uflex Limited (NSE:UFLEX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 24th of July in order to receive the dividend, which the company will pay on the 31st of August.

Uflex's next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Based on the last year's worth of payments, Uflex has a trailing yield of 0.9% on the current stock price of ₹218.5. 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! So we need to investigate whether Uflex can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Uflex

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Uflex paid out just 4.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 8.6% of its free cash flow in the last year.

It's positive to see that Uflex'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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Uflex, with earnings per share up 9.3% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Uflex has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. Uflex is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.