Readers hoping to buy Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Diamond Hill Investment Group's shares before the 10th of March in order to be eligible for the dividend, which will be paid on the 21st of March.

The company's upcoming dividend is US$1.50 a share, following on from the last 12 months, when the company distributed a total of US$6.00 per share to shareholders. Based on the last year's worth of payments, Diamond Hill Investment Group stock has a trailing yield of around 4.1% on the current share price of US$147.45. If you buy this business for its dividend, you should have an idea of whether Diamond Hill Investment Group's dividend is reliable and sustainable. So we need to investigate whether Diamond Hill Investment Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Diamond Hill Investment Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Diamond Hill Investment Group paying out a modest 38% of its earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Diamond Hill Investment Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Diamond Hill Investment Group's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Diamond Hill Investment Group has lifted its dividend by approximately 4.1% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Diamond Hill Investment Group? Diamond Hill Investment Group's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

If you're not too concerned about Diamond Hill Investment Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, Diamond Hill Investment Group has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.