Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wabash National Corporation (NYSE:WNC) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 6th of January to receive the dividend, which will be paid on the 28th of January.

Wabash National's next dividend payment will be US$0.08 per share. Last year, in total, the company distributed US$0.32 to shareholders. Looking at the last 12 months of distributions, Wabash National has a trailing yield of approximately 1.9% on its current stock price of $17.23. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Wabash National can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Wabash National

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. Wabash National's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 12% of its free cash flow in the last year.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Wabash National was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wabash National has delivered 7.5% dividend growth per year on average over the past four years.

We update our analysis on Wabash National every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Has Wabash National got what it takes to maintain its dividend payments? It's hard to get used to Wabash National paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Wabash National has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Wabash National and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 4 warning signs for Wabash National (1 is potentially serious) you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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