Readers hoping to buy German American Bancorp, Inc. (NASDAQ:GABC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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 German American Bancorp's shares before the 10th of August in order to be eligible for the dividend, which will be paid on the 20th of August.

The company's upcoming dividend is US$0.31 a share, following on from the last 12 months, when the company distributed a total of US$1.24 per share to shareholders. Looking at the last 12 months of distributions, German American Bancorp has a trailing yield of approximately 2.4% on its current stock price of US$51.04. If you buy this business for its dividend, you should have an idea of whether German American Bancorp's dividend is reliable and sustainable. As a result, readers should always check whether German American Bancorp has been able to grow its dividends, or if the dividend might be cut.

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. That's why it's good to see German American Bancorp paying out a modest 32% of its earnings.

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

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, German American Bancorp's earnings per share have been growing at 10% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. German American Bancorp has delivered 11% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy German American Bancorp for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, German American Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Wondering what the future holds for German American Bancorp? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.