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 DT Midstream, Inc. (NYSE:DTM) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. In other words, investors can purchase DT Midstream's shares before the 15th of June in order to be eligible for the dividend, which will be paid on the 15th of July.

The company's next dividend payment will be US$0.88 per share, and in the last 12 months, the company paid a total of US$3.52 per share. Calculating the last year's worth of payments shows that DT Midstream has a trailing yield of 2.5% on the current share price of US$140.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether DT Midstream can afford its dividend, and if the dividend could grow.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. DT Midstream is paying out an acceptable 73% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether DT Midstream generated enough free cash flow to afford its dividend. Over the last year it paid out 71% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that DT Midstream'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?

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at DT Midstream, with earnings per share up 7.1% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past five years, DT Midstream has increased its dividend at approximately 8.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has DT Midstream got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and DT Midstream paid out a bit over half of its earnings and free cash flow last year. To summarise, DT Midstream looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about DT Midstream'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.