It looks like Expand Energy Corporation (NASDAQ:EXE) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Expand Energy investors that purchase the stock on or after the 13th of August will not receive the dividend, which will be paid on the 3rd of September.

The company's upcoming dividend is US$0.575 a share, following on from the last 12 months, when the company distributed a total of US$3.19 per share to shareholders. Looking at the last 12 months of distributions, Expand Energy has a trailing yield of approximately 3.4% on its current stock price of US$92.84. If you buy this business for its dividend, you should have an idea of whether Expand Energy's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Expand Energy paying out a modest 27% 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. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Expand Energy'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 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. Expand Energy's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 50% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, Expand Energy has lifted its dividend by approximately 18% a year on average.

Final Takeaway

Is Expand Energy worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's hard to get excited about Expand Energy from a dividend perspective.

So while Expand Energy looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Expand Energy has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.