It looks like Alta Equipment Group Inc. (NYSE:ALTG) is about to go ex-dividend in the next four 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 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. In other words, investors can purchase Alta Equipment Group's shares before the 14th of February in order to be eligible for the dividend, which will be paid on the 28th of February.

The company's next dividend payment will be US$0.057 per share. Last year, in total, the company distributed US$0.23 to shareholders. Last year's total dividend payments show that Alta Equipment Group has a trailing yield of 3.1% on the current share price of US$7.43. If you buy this business for its dividend, you should have an idea of whether Alta Equipment Group's dividend is reliable and sustainable. As a result, readers should always check whether Alta Equipment Group has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Alta Equipment Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Alta Equipment Group 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. 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 Alta Equipment Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 27% 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?

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. Alta Equipment Group was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Alta Equipment Group's dividend payments are broadly unchanged compared to where they were three years ago.

Get our latest analysis on Alta Equipment Group's balance sheet health here.

The Bottom Line

Has Alta Equipment Group got what it takes to maintain its dividend payments? It's hard to get used to Alta Equipment Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Alta Equipment Group is facing. In terms of investment risks, we've identified 2 warning signs with Alta Equipment Group 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.