It looks like Globe International Limited (ASX:GLB) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 5th of March will not receive the dividend, which will be paid on the 20th of March.

Globe International's next dividend payment will be AU$0.05 per share, and in the last 12 months, the company paid a total of AU$0.12 per share. Based on the last year's worth of payments, Globe International has a trailing yield of 8.5% on the current stock price of A$1.42. 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 Globe International can afford its dividend, and if the dividend could grow.

View our latest analysis for Globe International

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Globe International is paying out an acceptable 64% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Globe International generated enough free cash flow to afford its dividend. The company paid out 95% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.

Globe International paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Globe International to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Globe International paid out over the last 12 months.

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. That's why it's comforting to see Globe International's earnings have been skyrocketing, up 36% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

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, ten years ago, Globe International has lifted its dividend by approximately 9.1% 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.

The Bottom Line

Is Globe International an attractive dividend stock, or better left on the shelf? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 95% of its cashflow, which is uncomfortably high. In summary, it's hard to get excited about Globe International from a dividend perspective.

Want to learn more about Globe International? Here's a visualisation of its historical rate of revenue and earnings growth.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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