Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Las Vegas Sands Corp. (NYSE:LVS) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Las Vegas Sands' shares before the 4th of August in order to be eligible for the dividend, which will be paid on the 12th of August.

The company's next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Looking at the last 12 months of distributions, Las Vegas Sands has a trailing yield of approximately 2.4% on its current stock price of US$49.87. 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 investigate whether Las Vegas Sands can afford its dividend, and if the dividend could grow.

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. Las Vegas Sands paid out a comfortable 45% of its profit last year. A useful secondary check can be to evaluate whether Las Vegas Sands generated enough free cash flow to afford its dividend. Luckily it paid out just 25% of its free cash flow last year.

It's positive to see that Las Vegas Sands'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Las Vegas Sands's earnings have been skyrocketing, up 62% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Las Vegas Sands's dividend payments per share have declined at 7.4% per year on average over the past 10 years, which is uninspiring. Las Vegas Sands is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Las Vegas Sands worth buying for its dividend? Las Vegas Sands 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.

In light of that, while Las Vegas Sands has an appealing dividend, it's worth knowing the risks involved with this stock.

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.