Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Copa Holdings, S.A. (NYSE:CPA) is about to go ex-dividend in just 4 days. 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. 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. Accordingly, Copa Holdings investors that purchase the stock on or after the 28th of February will not receive the dividend, which will be paid on the 14th of March.

The company's next dividend payment will be US$1.61 per share, and in the last 12 months, the company paid a total of US$6.44 per share. Based on the last year's worth of payments, Copa Holdings stock has a trailing yield of around 6.8% on the current share price of US$94.78. If you buy this business for its dividend, you should have an idea of whether Copa Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Copa Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Copa Holdings

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. That's why it's good to see Copa Holdings paying out a modest 44% of its earnings.

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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Copa Holdings's earnings have been skyrocketing, up 20% per annum for the past five years. Copa Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Copa Holdings has increased its dividend at approximately 5.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Has Copa Holdings got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Copa Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Copa Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Copa Holdings and you should be aware of this before buying any shares.

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.