Readers hoping to buy Harbour Energy plc (LON:HBR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Therefore, if you purchase Harbour Energy's shares on or after the 7th of September, you won't be eligible to receive the dividend, when it is paid on the 18th of October.

The company's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Last year's total dividend payments show that Harbour Energy has a trailing yield of 7.5% on the current share price of £2.536. If you buy this business for its dividend, you should have an idea of whether Harbour Energy's dividend is reliable and sustainable. As a result, readers should always check whether Harbour Energy has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Harbour Energy

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. Harbour Energy paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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. Luckily it paid out just 9.1% of its free cash flow last year.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Harbour Energy 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.

Unfortunately Harbour Energy has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Remember, you can always get a snapshot of Harbour Energy's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Harbour Energy an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that in mind though, if the poor dividend characteristics of Harbour Energy don't faze you, it's worth being mindful of the risks involved with this business. In terms of investment risks, we've identified 1 warning sign with Harbour Energy and understanding them should be part of your investment process.

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.

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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.