Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The J. M. Smucker Company (NYSE:SJM) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, J. M. Smucker investors that purchase the stock on or after the 16th of November will not receive the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be US$1.06 per share, and in the last 12 months, the company paid a total of US$4.24 per share. Based on the last year's worth of payments, J. M. Smucker stock has a trailing yield of around 3.9% on the current share price of $108.74. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether J. M. Smucker has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for J. M. Smucker

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. J. M. Smucker reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. 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. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. J. M. Smucker 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, J. M. Smucker has lifted its dividend by approximately 7.4% a year on average.

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

The Bottom Line

Should investors buy J. M. Smucker for the upcoming dividend? It's hard to get used to J. M. Smucker paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that being said, if you're still considering J. M. Smucker as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 2 warning signs for J. M. Smucker that you should be aware of before investing in their shares.

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.