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 Tiptree Inc. (NASDAQ:TIPT) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Tiptree's shares on or after the 17th of August will not receive the dividend, which will be paid on the 24th of August.

The company'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$0.24 to shareholders. Calculating the last year's worth of payments shows that Tiptree has a trailing yield of 1.3% on the current share price of US$17.95. 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.

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. Tiptree reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Tiptree 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Tiptree has lifted its dividend by approximately 9.1% a year on average.

Get our latest analysis on Tiptree's balance sheet health here.

Final Takeaway

Should investors buy Tiptree for the upcoming dividend? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that in mind though, if the poor dividend characteristics of Tiptree don't faze you, it's worth being mindful of the risks involved with this business.

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

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.