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 Richards Packaging Income Fund (TSE:RPI.UN) is about to go ex-dividend in just four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Richards Packaging Income Fund's shares before the 29th of November in order to receive the dividend, which the company will pay on the 14th of December.

The company's next dividend payment will be CA$0.11 per share, and in the last 12 months, the company paid a total of CA$1.32 per share. Based on the last year's worth of payments, Richards Packaging Income Fund stock has a trailing yield of around 2.9% on the current share price of CA$45.9. If you buy this business for its dividend, you should have an idea of whether Richards Packaging Income Fund's dividend is reliable and sustainable. As a result, readers should always check whether Richards Packaging Income Fund has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Richards Packaging Income Fund

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. Its dividend payout ratio is 78% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 48% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Richards Packaging Income Fund paid out over the last 12 months.

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. For this reason, we're glad to see Richards Packaging Income Fund's earnings per share have risen 19% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Richards Packaging Income Fund has delivered an average of 5.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Richards Packaging Income Fund is keeping back more of its profits to grow the business.

To Sum It Up

Is Richards Packaging Income Fund an attractive dividend stock, or better left on the shelf? We like Richards Packaging Income Fund's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 3 warning signs for Richards Packaging Income Fund that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here