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 John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is about to go ex-dividend in just three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase John B. Sanfilippo & Son's shares before the 17th of August in order to receive the dividend, which the company will pay on the 9th of September.

The company's next dividend payment will be US$2.00 per share, and in the last 12 months, the company paid a total of US$2.50 per share. Looking at the last 12 months of distributions, John B. Sanfilippo & Son has a trailing yield of approximately 3.0% on its current stock price of US$84.60. If you buy this business for its dividend, you should have an idea of whether John B. Sanfilippo & Son's dividend is reliable and sustainable. As a result, readers should always check whether John B. Sanfilippo & Son has been able to grow its dividends, or if the dividend might be cut.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. John B. Sanfilippo & Son is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (60%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that John B. Sanfilippo & Son's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see John B. Sanfilippo & Son earnings per share are up 4.0% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. John B. Sanfilippo & Son has delivered an average of 5.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy John B. Sanfilippo & Son for the upcoming dividend? Earnings per share have been growing at a steady rate, and John B. Sanfilippo & Son paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy John B. Sanfilippo & Son today.

In light of that, while John B. Sanfilippo & Son has an appealing dividend, it's worth knowing the risks involved with this stock. Sanfilippo & Son you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.