It looks like Keurig Dr Pepper Inc. (NASDAQ:KDP) is about to go ex-dividend in the next two 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. 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. Meaning, you will need to purchase Keurig Dr Pepper's shares before the 26th of June to receive the dividend, which will be paid on the 10th of July.

The company's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.92 per share. Calculating the last year's worth of payments shows that Keurig Dr Pepper has a trailing yield of 3.0% on the current share price of US$30.87. If you buy this business for its dividend, you should have an idea of whether Keurig Dr Pepper's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Keurig Dr Pepper is paying out an acceptable 68% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Keurig Dr Pepper generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (79%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Keurig Dr Pepper, with earnings per share up 7.4% on average over the last five years. Decent historical earnings per share growth suggests Keurig Dr Pepper has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, Keurig Dr Pepper has lifted its dividend by approximately 5.5% a year on average. 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

Should investors buy Keurig Dr Pepper for the upcoming dividend? Earnings per share have been growing modestly and Keurig Dr Pepper paid out a bit over half of its earnings and free cash flow last year. In summary, it's hard to get excited about Keurig Dr Pepper from a dividend perspective.

If you're not too concerned about Keurig Dr Pepper's ability to pay dividends, you should still be mindful of some of the other risks that this business faces.

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.