Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CME Group Inc. (NASDAQ:CME) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase CME Group's shares on or after the 7th of March will not receive the dividend, which will be paid on the 26th of March.

The company's next dividend payment will be US$1.25 per share. Last year, in total, the company distributed US$10.40 to shareholders. Calculating the last year's worth of payments shows that CME Group has a trailing yield of 4.3% on the current share price of US$253.77. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether CME Group can afford its dividend, and if the dividend could grow.

View our latest analysis for CME Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CME Group paid out a comfortable 47% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, CME Group's earnings per share have been growing at 10% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CME Group has delivered 9.2% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid CME Group? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating CME Group more closely.

So while CME Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for CME Group you should know about.

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.