Jamieson Wellness Inc. (TSE:JWEL) stock is about to trade ex-dividend in 2 days time. Ex-dividend means that investors that purchase the stock on or after the 27th of February will not receive this dividend, which will be paid on the 13th of March.

Jamieson Wellness's next dividend payment will be CA$0.11 per share. Last year, in total, the company distributed CA$0.40 to shareholders. Based on the last year's worth of payments, Jamieson Wellness stock has a trailing yield of around 1.6% on the current share price of CA$26.98. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Jamieson Wellness

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Jamieson Wellness's payout ratio is modest, at just 49% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 213% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Jamieson Wellness intends to continue funding this dividend, or if it could be forced to the payment.

While Jamieson Wellness's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Jamieson Wellness to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Jamieson Wellness has grown its earnings rapidly, up 135% a year 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jamieson Wellness has delivered 11% dividend growth per year on average over the past three years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Jamieson Wellness got what it takes to maintain its dividend payments? We like that Jamieson Wellness has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's hard to get excited about Jamieson Wellness from a dividend perspective.

Ever wonder what the future holds for Jamieson Wellness? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

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