Readers hoping to buy RTX A/S (CPH:RTX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 24th of January in order to be eligible for this dividend, which will be paid on the 28th of January.

RTX's next dividend payment will be ø2.50 per share, on the back of last year when the company paid a total of ø2.50 to shareholders. Based on the last year's worth of payments, RTX has a trailing yield of 1.2% on the current stock price of DKK214. If you buy this business for its dividend, you should have an idea of whether RTX's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for RTX

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see RTX paying out a modest 30% of its earnings. A useful secondary check can be to evaluate whether RTX generated enough free cash flow to afford its dividend. The good news is it paid out just 20% of its free cash flow in the last year.

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 how much of its profit RTX paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see RTX earnings per share are up 5.1% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, six years ago, RTX has lifted its dividend by approximately 31% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.