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 The J. M. Smucker Company (NYSE:SJM) is about to go ex-dividend in just 4 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. Therefore, if you purchase J. M. Smucker's shares on or after the 13th of February, you won't be eligible to receive the dividend, when it is paid on the 2nd of March.

The company's next dividend payment will be US$1.10 per share, and in the last 12 months, the company paid a total of US$4.40 per share. Based on the last year's worth of payments, J. M. Smucker has a trailing yield of 4.0% on the current stock price of US$109.51. If you buy this business for its dividend, you should have an idea of whether J. M. Smucker's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. J. M. Smucker's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the last year it paid out 72% of its free cash flow as dividends, within the usual range for most companies.

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 earnings fall far enough, the company could be forced to cut its dividend. J. M. Smucker was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

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, J. M. Smucker has lifted its dividend by approximately 5.6% a year on average.

We update our analysis on J. M. Smucker every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid J. M. Smucker? It's hard to get used to J. M. Smucker paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in J. M. Smucker and want to know more, you'll find it very useful to know what risks this stock faces. M. Smucker (of which 1 makes us a bit uncomfortable!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.