Columbus McKinnon Corporation (NASDAQ:CMCO) is about to trade ex-dividend in the next four 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 Columbus McKinnon's shares on or after the 7th of February will not receive the dividend, which will be paid on the 18th of February.

The company's next dividend payment will be US$0.07 per share, on the back of last year when the company paid a total of US$0.28 to shareholders. Looking at the last 12 months of distributions, Columbus McKinnon has a trailing yield of approximately 0.8% on its current stock price of US$36.42. If you buy this business for its dividend, you should have an idea of whether Columbus McKinnon's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Columbus McKinnon

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Columbus McKinnon is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Columbus McKinnon generated enough free cash flow to afford its dividend. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Columbus McKinnon's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Columbus McKinnon's 22% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Columbus McKinnon has increased its dividend at approximately 5.8% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Should investors buy Columbus McKinnon for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about Columbus McKinnon from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Columbus McKinnon, you should know about the other risks facing this business. To help with this, we've discovered 3 warning signs for Columbus McKinnon (1 is significant!) that you ought to be aware of before buying the shares.

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.