It looks like Alpha Financial Markets Consulting plc (LON:AFM) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Alpha Financial Markets Consulting's shares on or after the 8th of September, you won't be eligible to receive the dividend, when it is paid on the 20th of September.

The company's next dividend payment will be UK£0.075 per share. Last year, in total, the company distributed UK£0.10 to shareholders. Calculating the last year's worth of payments shows that Alpha Financial Markets Consulting has a trailing yield of 2.6% on the current share price of £3.925. If you buy this business for its dividend, you should have an idea of whether Alpha Financial Markets Consulting's dividend is reliable and sustainable. So we need to investigate whether Alpha Financial Markets Consulting can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Alpha Financial Markets Consulting

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Alpha Financial Markets Consulting distributed an unsustainably high 135% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 26% of its free cash flow in the past year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Alpha Financial Markets Consulting fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Alpha Financial Markets Consulting's earnings have been skyrocketing, up 30% per annum for the past five years.