It looks like FFI Holdings Limited (ASX:FFI) is about to go ex-dividend in the next four 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase FFI Holdings' shares on or after the 29th of September will not receive the dividend, which will be paid on the 12th of October.

The company's next dividend payment will be AU$0.10 per share, and in the last 12 months, the company paid a total of AU$0.10 per share. Last year's total dividend payments show that FFI Holdings has a trailing yield of 2.4% on the current share price of A$4.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for FFI Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. FFI Holdings paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. FFI Holdings's earnings per share have fallen at approximately 5.7% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. FFI Holdings's dividend payments per share have declined at 8.2% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid FFI Holdings? We're not overly enthused to see FFI Holdings's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. We're unconvinced on the company's merits, and think there might be better opportunities out there.

With that being said, if dividends aren't your biggest concern with FFI Holdings, you should know about the other risks facing this business. Be aware that FFI Holdings is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.