Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Viva Energy Group Limited (ASX:VEA) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 26th of September to receive the dividend, which will be paid on the 14th of October.

Viva Energy Group's next dividend payment will be AU$0.02 per share, and in the last 12 months, the company paid a total of AU$0.04 per share. Looking at the last 12 months of distributions, Viva Energy Group has a trailing yield of approximately 2.1% on its current stock price of A$1.97. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Viva Energy Group

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. That's why it's good to see Viva Energy Group paying out a modest 26% of its earnings. 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 50% of its free cash flow as dividends, within the usual range for most companies.

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 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Viva Energy Group earnings per share are up 9.8% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Unfortunately Viva Energy Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Viva Energy Group an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest, and it's interesting that Viva Energy Group is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's hard to get excited about Viva Energy Group from a dividend perspective.

Curious what other investors think of Viva Energy Group? See what analysts 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.

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.