Readers hoping to buy Hess Midstream LP (NYSE:HESM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase Hess Midstream's shares before the 7th of February to receive the dividend, which will be paid on the 14th of February.

The company's upcoming dividend is US$0.6343 a share, following on from the last 12 months, when the company distributed a total of US$2.47 per share to shareholders. Based on the last year's worth of payments, Hess Midstream has a trailing yield of 7.2% on the current stock price of US$34.18. 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.

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. Hess Midstream distributed an unsustainably high 116% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 Hess Midstream, with earnings per share up 6.5% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, Hess Midstream has lifted its dividend by approximately 11% 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.

The Bottom Line

Is Hess Midstream worth buying for its dividend? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 116% of last year's earnings. We're unconvinced on the company's merits, and think there might be better opportunities out there.

If you want to look further into Hess Midstream, it's worth knowing the risks this business faces. For example, Hess Midstream has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.