Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ashford Hospitality Trust, Inc. (NYSE:AHT) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 27th of September will not receive this dividend, which will be paid on the 15th of October.

Ashford Hospitality Trust's next dividend payment will be US$0.06 per share, on the back of last year when the company paid a total of US$0.2 to shareholders. Based on the last year's worth of payments, Ashford Hospitality Trust stock has a trailing yield of around 7.4% on the current share price of $3.24. If you buy this business for its dividend, you should have an idea of whether Ashford Hospitality Trust'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 Ashford Hospitality Trust

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ashford Hospitality Trust distributed an unsustainably high 121% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. For regulatory reasons, it's not uncommon to see REITs paying out around 100% of their earnings. However, we feel Ashford Hospitality Trust's payout ratio is still too high, and we wonder if the dividend is being funded by debt. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Ashford Hospitality Trust didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Ashford Hospitality Trust reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ashford Hospitality Trust's dividend payments per share have declined at 5.5% per year on average over the past nine years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Remember, you can always get a snapshot of Ashford Hospitality Trust's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Ashford Hospitality Trust an attractive dividend stock, or better left on the shelf? It's hard to get used to Ashford Hospitality Trust paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Ever wonder what the future holds for Ashford Hospitality Trust? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.