Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Oppenheimer Holdings Inc. (NYSE:OPY) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Oppenheimer Holdings' shares on or after the 15th of May will not receive the dividend, which will be paid on the 29th of May.

The company's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.72 to shareholders. Based on the last year's worth of payments, Oppenheimer Holdings stock has a trailing yield of around 0.8% on the current share price of US$95.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are 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. Oppenheimer Holdings paid out just 7.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Oppenheimer Holdings's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

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, Oppenheimer Holdings has lifted its dividend by approximately 5.0% a year on average.

The Bottom Line

Has Oppenheimer Holdings got what it takes to maintain its dividend payments? Oppenheimer Holdings's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

If you're not too concerned about Oppenheimer Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. We've identified 2 warning signs with Oppenheimer Holdings (at least 1 which is potentially serious), and understanding these should be part of your investment process.

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.