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 Nelnet, Inc. (NYSE:NNI) is about to go ex-dividend in just 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 of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Accordingly, Nelnet investors that purchase the stock on or after the 1st of September will not receive the dividend, which will be paid on the 15th of September.

The company's upcoming dividend is US$0.33 a share, following on from the last 12 months, when the company distributed a total of US$1.32 per share to shareholders. Calculating the last year's worth of payments shows that Nelnet has a trailing yield of 1.0% on the current share price of US$127.38. If you buy this business for its dividend, you should have an idea of whether Nelnet's dividend is reliable and sustainable. So we need to investigate whether Nelnet can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nelnet has a low and conservative payout ratio of just 15% of its income after tax.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Nelnet paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Nelnet's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Nelnet has lifted its dividend by approximately 11% a year on average.

To Sum It Up

Is Nelnet an attractive dividend stock, or better left on the shelf? Nelnet's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

So if you want to do more digging on Nelnet, you'll find it worthwhile knowing the risks that this stock faces.

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.