Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Expedia Group, Inc. (NASDAQ:EXPE) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Expedia Group's shares on or after the 28th of May will not receive the dividend, which will be paid on the 18th of June.

The company's upcoming dividend is US$0.48 a share, following on from the last 12 months, when the company distributed a total of US$1.92 per share to shareholders. Last year's total dividend payments show that Expedia Group has a trailing yield of 0.9% on the current share price of US$214.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Expedia Group is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 5.0% of its cash flow last year.

It's positive to see that Expedia Group'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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Expedia Group has grown its earnings rapidly, up 61% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Expedia Group looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Expedia Group has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Expedia Group got what it takes to maintain its dividend payments? Expedia Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

So while Expedia Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Expedia Group and understanding them 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.