Jacobs Solutions Inc. (NYSE:J) is about to trade 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Jacobs Solutions' shares on or after the 21st of February, you won't be eligible to receive the dividend, when it is paid on the 21st of March.

The company's next dividend payment will be US$0.32 per share, on the back of last year when the company paid a total of US$1.16 to shareholders. Looking at the last 12 months of distributions, Jacobs Solutions has a trailing yield of approximately 0.9% on its current stock price of US$128.88. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Jacobs Solutions

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. That's why it's good to see Jacobs Solutions paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Jacobs Solutions generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

It's positive to see that Jacobs Solutions'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Jacobs Solutions's earnings per share have risen 12% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last eight years, Jacobs Solutions has lifted its dividend by approximately 8.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Jacobs Solutions an attractive dividend stock, or better left on the shelf? Jacobs Solutions has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Wondering what the future holds for Jacobs Solutions? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.