Visa Inc. (NYSE:V) stock is about to trade ex-dividend in 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 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. This means that investors who purchase Visa's shares on or after the 12th of November will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be US$0.59 per share. Last year, in total, the company distributed US$2.36 to shareholders. Looking at the last 12 months of distributions, Visa has a trailing yield of approximately 0.8% on its current stock price of US$307.40. If you buy this business for its dividend, you should have an idea of whether Visa's dividend is reliable and sustainable. As a result, readers should always check whether Visa has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Visa

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Visa paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Visa's earnings per share have risen 14% per annum 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. Since the start of our data, 10 years ago, Visa has lifted its dividend by approximately 19% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy Visa for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Visa appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Visa for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Visa that we recommend you consider before investing in the business.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.