It looks like George Weston Limited (TSE:WN) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 14th of September, you won't be eligible to receive this dividend, when it is paid on the 1st of October.

George Weston's next dividend payment will be CA$0.53 per share, and in the last 12 months, the company paid a total of CA$2.10 per share. Based on the last year's worth of payments, George Weston stock has a trailing yield of around 2.2% on the current share price of CA$94.43. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for George Weston

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately George Weston's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether George Weston generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see George Weston has grown its earnings rapidly, up 53% a year for the past five years. George Weston is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, George Weston has lifted its dividend by approximately 3.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because George Weston is keeping back more of its profits to grow the business.

The Bottom Line

Is George Weston an attractive dividend stock, or better left on the shelf? George Weston has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. George Weston looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in George Weston for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for George Weston that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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